Australian banking major ANZ has reported a rise in first half profits rise of 10 per cent to $2.92 billion, however the lender warned that margins on its domestic Australian business are shrinking.
According to ANZ, net profit for the half year ending March 31st rose from $2.66 billion in the same time period during the previous year. Analysts had been expecting a slightly higher figure of $2.96 billion.
Market watchers are waiting to see whether the lender will pass on the rate cut announced by the Australian central bank, though ANZ refuses to comment on its decision before making its official announcement.
Mike Smith, ANZ’s chief executive said the lender was adapting to changes in the financial system, which would have an impact on both staff and its customers.
“Our recent decisions on interest rates for customers in Australia and on employment within the group reflect the need to reshape our business,” he said.
“Clearly, though, we need to work harder to find new ways of responding to customer and community concerns about banking and to the changes that have been brought upon the banking sector by this environment.”
In its statement, ANZ attributed the rise in profits to an improvement in the results delivered from the lenders operations in America, Europe and Asia.
“In Australia, we made market share gains and customer satisfaction remained strong,” Mr Smith said.
“Our financial performance, however, was subdued, significantly impacted by declining margins and the structural shift that’s occurred since the financial crisis with persistently lower demand for credit.”
ANZ says that net interest margins are declining due to the intense competition for deposits in Australia. The lender says that low demand for loans from both business and consumers coupled with increased long term funding costs were responsible.
Net interest margin during the half year ending March 31st fell six basis points, down from 2.44 per cent to 2.38 per cent.
Net interest margin is a reflection of the profit the bank makes on loan interest