ANZ New Zealand 1Q profits sinks 25% from inflated 2011 derivative gains

ANZ New Zealand, the country's biggest lender, reported a 25 percent fall in first-quarter profit as the value of the bank's hedging derivatives return to more normal levels, and as interest margins softened.

Net profit dropped to $300 million in the three months ended December 31, from $400 million a year earlier, according to ANZ New Zealand's general disclosure statement. Net interest income fell 2.5 percent to $651 million, and other operating revenue more than halved to $93 million.

The Australian parent's cash profit rose 6.2 percent to A$1.53 billion from a year earlier.

"This reflects adjustments the whole sector has experienced with FX and basis hedge valuations due to volatility in Europe, followed by the return to more normal levels as the situation in Europe has improved over the past year," a spokesman says in an emailed statement.

"Margins have also fallen from their 2012 peak due to a range of market factors, including the move from floating to fixed mortgages." 

The bank is under way with the biggest change on the New Zealand lending scene since ANZ Bank bought National Bank from Lloyds TSB in 2003 for $5.7 billion. It will scrap the National Bank brand, shrinking the group's network of branches and cutting out duplication ahead of relinquishing the rights to use the Lloyds black horse logo in 2014.

"While the revenue environment remains subdued, the simplification programme is delivering productivity benefits including reductions in technology operating costs," ANZ says in a trading update. "As expected, margins have declined from their 2012 peak impacted in part by a short-term tactical campaign during December."

ANZ New Zealand lifted home loans to $47.6 billion as at December 31 from $46.12 billion three months earlier, and net loans advanced to $88.23 billion from $86.78 billion. Term deposits slipped to $33.55 billion as at December 31 from $33.92 billion at the end of September.

The New Zealand branch of the Australian parent reported a 29 percent drop in first-quarter profit to $215 million, with a 3.4 percent fall in net interest income to $615 million.

The branch's home loans were $56.19 billion as at December 31, with $96.82 billion in net loans, while term deposits were at $33.55 billion.

ANZ's shares fell 0.2 percent to $34.30 on the NZX.

(BusinessDesk)