ANZ Group says NZ lending down, deposits and margins up in first quarter with no return to pre-crisis credit growth in forseeable future

Australia's ANZ Banking Group, owner of New Zealand's ANZ and National banks, OnePath and UDC Finance, says lending volumes fell 0.7% at its New Zealand business in the December quarter with deposits rising 2.4% and margins also up.

The group made these comments in its first quarter trading update, where it reported a 4.1% rise (versus the equivalent period of the previous year) in unaudited underlying profit for the three months to December 31 to A$1.48 billion, after adjustments for non-core items.

ANZ group CEO Mike Smith said the business had to continue to adapt to changes in the domestic and international environment.

"There will not be a return to the level of credit growth that banks experienced pre-crisis for the foreseeable future, particularly in our major domestic markets in Australia and New Zealand, as customers reduce their gearing and businesses pace investments," said Smith. "New regulation is also increasing costs for banks globally including the new Basel III rules."

Of New Zealand Smith said economic growth was subdued but ANZ's business momentum remained positive. The ANZ NZ business delivered record annual net profit after tax of NZ$1.085 billion in the year to September 2011.

A "business simplification programme" was underway in New Zealand, which had delivered some early savings and customer satisfaction was high, said Smith.

"Lending volumes decreased 0.7% (in NZ dollar terms) while deposits increased 2.4% (also in NZ dollar terms). Credit quality has continued to improve as has the business margin."

In the year to September, ANZ's net interest margins rose 11 basis points to 2.38% and 5 basis points in the second half-year from first half to 2.40%.

Smith added that work to move ANZ and National Bank staff to a single IT platform had made good progress with testing and integration work expected to be completed later this calendar year.

"Completion of the programme is expected in incur around A$90 million in IT and related costs which, consistent with the treatment in 2011, will be excluded from underlying profit," Smith said.

The 2011 annual result included costs of NZ$111 million, after tax, of shifting both ANZ and National Bank staff onto one core banking system eight years after ANZ bought National Bank from Britain's Lloyds TSB in 2003. ANZ has previously said his project is expected to be completed, with migration to the single platform, in late 2012.