UPDATE 1-ANZ posts 11 pct rise in cash profit on Asia growth, boosts dividend

Wed Apr 30, 2014 7:36pm EDT

Related Topics

* H1 cash profit $3.25 bln vs $2.95 bln

* H1 net profit $3.15 billion vs $2.71 bln

* Dividend rises 14 pct

* Net interest margin narrows to 2.15 pct (Adds detail on cash profit, CEO comment, industry context)

SYDNEY, May 1 (Reuters) - Australia and New Zealand Banking Group Ltd posted an 11 percent rise in cash profit on Thursday, boosting its dividend as strong growth in its Asia business helped it beat analysts' expectations.

Cash profit, a measure that excludes one-off items and is closely watched by industry analysts, was A$3.51 billion ($3.25 billion) for the six months to the end of March, up from A$3.18 billion a year ago.

Analysts had, on average, expected Australia's third-biggest lender to report cash earnings of A$3.4 billion.

Australia's banks are on track for a sixth year of record profits, bolstered by low interest rates and shrinking bad debt provisions. Market leader Commonwealth Bank of Australia reported a record half-yearly cash profit of A$4.27 billion in February.

ANZ is aiming to set itself apart by pursuing a pan-Asian strategy and growing the proportion of earnings it gets outside Australia. It is also targeting a larger share of Australian home loans.

"Our international business, particularly Asia, is firing on all cylinders with revenue and profits again growing strongly, and a sustained improvement in returns," Chief Executive Mike Smith said in a statement.

The bank is returning A$2.3 billion to shareholders, thanks to a 14 percent rise in the dividend to A$0.83 per share.

Net profit grew 15 percent to A$3.38 billion from A$2.93 billion, supported by a 43 percent jump in international and institutional banking in Asia-Pacific, Europe and the Americas.

Net interest income, the difference between interest earned and paid out, rose 9 percent.

The quality of ANZ's loan book improved with bad debt at its lowest since September 2008. It sees bad loan provisions falling about 10 percent in the year to September 2014.

However, Smith cautioned that competition was putting pressure on the bank's Australia business and said growth in some segments remained subdued, without specifying.

ANZ's net interest margin, a key gauge of a bank's profitability, narrowed 9 basis points to 2.15 percent from a year ago.

Since the 2008 global financial crisis, mortgages and consumer businesses have generated about 35 to 40 percent of Australian bank earnings, making them the primary driver of profit growth for the so-called "Big Four" - ANZ, CBA, National Australia Bank and Westpac Banking Corp.

Record low interest rates, currently at 2.5 percent, have filtered through to higher house prices and home building while boosting household wealth and giving consumers the confidence to start spending again.

ANZ had the highest deposit and loan growth of the Big Four at 10.7 percent and 9.7 percent respectively, for the last fiscal year, according to Thomson Reuters Starmine.

($1 = 1.0793 Australian Dollars) (Reporting by Swati Pandey; Additional reporting by Tripti Kalro in Bangalore; Editing by Jane Wardell and Stephen Coates)

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