UPDATE 1-ANZ Q1 cash profit up 6.2 pct on strong global markets, retail banking

Thu Feb 14, 2013 4:45pm EST

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SYDNEY, Feb 15 (Reuters) - Australia and New Zealand Banking Corp, the country's fourth-largest bank, posted a 6.2 percent rise in first quarter cash earnings on Friday as favorable trading conditions and a rise in customers boosted its global markets division.

Earnings were constrained by a weaker performance in the bank's international and institutional banking business, where it said margins remain under pressure, while the environment for wealth management "remains subdued."

ANZ is trying to model itself on HSBC by turning into a regional Asian lender, and is seeking to double earnings from Asia to up to 30 percent of its total by 2017.

"Our strategy has seen us benefit from volume growth in Asia and our exposure to these opportunities is an increasing important part of the group's earnings with Greater China our third largest source of profits after Australia and New Zealand," Chief Executive Mike Smith said in a statement.

ANZ reported cash profit of A$1.53 billion ($1.58 billion), compared with A$1.49 billion a year ago, amid soft economic conditions in its current key markets of Australia and New Zealand.

Group interest margins, a key measure of core bank profits, were flat compared to the end of last financial year.

Analysts' forecasts were not available as the update was the first time ANZ has reported cash profit, which excludes one-offs and non-cash accounting items and is closely watched by investors. It previously reported underlying profit.

The country's "Big Four" banks -- ANZ, National Australia Bank, Commonwealth Bank of Australia and Westpac -- posted a combined record profit of more than $25 billion in 2011/12, but growth slipped to a three-year low as Australia came under pressure from slowing growth in China, its major export market.

More recent signs suggest a resurgence in consumer confidence in one of the few developed countries to avoid a recession during the global financial crisis.

CBA, which reports on a different schedule to its "Big Four" peers, on Wednesday posted a record A$3.58 billion first-half profit and provided an upbeat outlook for the rest of the year.

ANZ is due to report first-half earnings on April 30, followed by Westpac on May 3 and NAB on May 9.

GLOBAL MARKETS BOOST

ANZ's global markets income jumped 26 percent to A$544 million. Customer sales income increased 4 percent on quarterly average for 2012, with the Australian business performing well and the Asian business having its strongest ever customer sales result.

The bank said that while investment markets have improved, business conditions for the sector remain challenging.

ANZ said its bad debt charges were in line with expectations and there were no developments, including recent wild fires and floods in Australia, that would materially change its guidance for the year.

The bank said in October it expected higher provisions for bad debts in the year to September 2013 as the Australian economy cools. It booked a charge of A$1.25 billion last financial year.

Analysts expect the top four banks' bad-debt charges to rise between 12 and 20 percent annually for the next two years.

ANZ said revenue growth reflected the constrained business environment, with "reasonable" volume growth in Asia offset by margin pressure in New Zealand and in the international and institutional banking division. ($1 = 0.9655 Australian dollar) (Reporting by Jane Wardell, editing by Lincoln Feast and Chizu Nomiyama)

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