ANZ posts strong lift in Q1 cash profit

Smith says global challenges becoming predictable, unveils $1bn notes issue.

Australia and New Zealand Banking Group Ltd has posted a strong lift in its first-quarter cash profit, as the lender says global challenges persist but are becoming more predictable.

In the three months to December 31, the lender posted an unaudited cash profit of $1.73 billion, a 13% lift on the previous corresponding period.

Unaudited statutory net profit in the same period was $1.64 billion.

Investors responded well to the news. At 1030 AEDT, ANZ shares were 0.67% higher at $30.11, against a slight benchmark lift of 0.04%.

ANZ chief executive officer Mike Smith said the lender's distinctive strategy - based on growth in its domestic franchises as well as in Asia and strong operational and productivity disciplines - were continuing to deliver a consistent improvement in business growth and financial performance.

“The bottom line is that we have made a good start to 2014," he said.

"There remain a number of challenging issues in the global economic environment however these are now largely more predictable.

"Our performance in the first quarter means we are on track to deliver a solid 2014."

Meanwhile, the bank's provision charge fell to $191 million during the quarter, down from $322 million in the September quarter, thanks to an improvement in credit quality.

Mr Smith said ANZ's Australian division grew market share in both retail and corporate and commercial during the quarter while also making further investments through the 'Banking on Australia' program.

He added that in New Zealand, ANZ had consolidated its market-leading position while the global wealth division continued to improve business performance through productivity gains and increased sales of wealth solutions to bank customers.

Mr Smith also said the lender's business strategy was producing ongoing improvements in the quality of its lending book.

"Together with the outlook for continued low interest rates and low levels of corporate leverage we now expect the total fiscal 2014 provision charge is likely to be around 10 per cent lower than fiscal 2013," he said.

He said the outlook for the bank was positive for the remainder of 2014 despite some concerns about the bank's exposure to a slowdown in emerging markets economies due to its heavy investment in Asia.

Annual revenue growth in fiscal 2014 would be between 4% and 5%, Mr Smith said, assuming no change in foreign exchange rates.

Expense growth is seen at around two per cent and the risk profile is expected to remain stable.

He added the group's first-quarter performance was in line with guidance provided at ANZ's full-year results for fiscal 2013.

ANZ announces $1bn notes issues

ANZ also announced a notes issue, using ANZ Capital Notes 2, which is intended to raise $1 billion, though it retained the right to change the size of the offer.

The lender said it expects to open the offer on February 19 and will use the proceeds to refinance the convertible preference shares it issued in September 2008 and for general corporate purposes.

ANZ said the notes will constitute Basel III-compliant Additional Tier 1 Capital under the Australian Prudential Regulation Authority’s current capital adequacy standards.

ANZ Securities, Goldman Sachs, J.P. Morgan, Morgans, Morgan Stanley, UBS and Westpac Institutional Bank have been appointed as joint lead managers and Bell Potter, JBWere and Ord Minnett have been appointed as co-managers on the transaction.

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