New Zealand's biggest bank records profit fall due to rising bad debts and software charge

ANZ New Zealand’s profit for the nine months to June fell 8.5% as bad debts rose and due to a change to how quickly the bank writes off software costs.

ANZ’s unaudited net profit after tax for the nine months to June 30 dropped $111 million, or 8.5%, to $1.193 billion from $1.304 billion in the same period of the previous year. The nine month period included a $96 million charge associated with a change to the application of the ANZ Banking Group’s software capitalisation policy.

The bank’s provision for credit impairment jumped $47 million, or 81%, to $105 million, which ANZ attributes to a normalisation of provision levels, plus lower levels of write backs and recoveries than experienced over recent years.

Customer deposits increased 7% and gross lending rose 5% in the nine months to June 30 to $120.187 billion. Residential mortgage lending increased a net $1.742 billion during the June quarter, or 2.6%, to $69.594 billion. The home loan growth was roughly in line with market, with Reserve Bank sector credit data showing home loan growth of 2.7% in the June quarter.

Meanwhile, ANZ’s net interest income was up $127 million, or 6%, to $2.267 billion. However, total operating income dropped $14 million to $2.893 billion. Operating expenses rose $77 million, or 7%, to $1.185 billion, although this included the software capitalisation change, which if excluded, means expenses actually fell 2%, which ANZ attributed to “disciplined” costs management and productivity gains.

Here’s ANZ’s announcement.