ANZ Bank chief executive Mike Smith has signalled the bank will not retreat from its aggressive push into Asia, saying this remains a critical part of the plan to lift shareholder returns.
After unveiling a record $6.5 billion full-year cash profit and sharply higher dividends on Tuesday, Mr Smith stood by his contentious plan to ramp up the share of profits it makes outside Australia and New Zealand in coming years.
The strategy has come under fire from market analysts in recent weeks amid lower returns in Asia, but Mr Smith said this was outweighed by the growth potential.
He also called for the government's financial system inquiry to examine the bipartisan "four pillars" policy that prevents mergers between the big four banks.
The return on ANZ shareholder funds invested in Asia in the year to September lagged those in its traditional markets of Australia and New Zealand, with a return on equity from Asia in the low double digits compared with the group-wide return of 15.3 per cent this year.
In the year to September, group-wide earnings jumped 11 per cent but profits from outside Australia and New Zealand rose by 5 per cent to $1 billion.
Mr Smith urged investors to take a long-term perspective and consider the greater growth potential of Asia's economies.
"The future of Australia and New Zealand is now completely linked to Asia, which is also the number one driver of global economic growth," he said. "We are the only Australian bank - and one of just a few double-A-rated international banks - that provides customers with a network and connectivity to these fastest-growing markets."
Pressed to explain how a presence in fast-growing economies translated into higher shareholder returns, Mr Smith said it was necessary to have "critical mass" in a region.
"If you are of critical mass you will have a platform, which will actually automatically grow with GDP growth, so if you're in a higher GDP growth region ... you would automatically expect your business to grow faster than one in a low one."
ANZ will pay a fully franked final dividend of 91¢ a share on December 16, taking total distributions for the year to $1.64, a 13 per cent increase. Its shares surged to a record close of $34.06.
A fund manager at Alphinity, Andrew Martin, said the higher dividend and a move to buy back shares issued under its dividend reinvestment plan boded well for future shareholder returns.
"It's a positive signal from the board that they are pretty confident in their ability to grow the business," he said.
Despite the heavy focus on its Asian plans, a strong performer was ANZ's Australian arm, where it has been pinching home loan, credit card and deposit customers from rivals. Profits in the division, which includes retail and small-business lending, made the biggest contribution to profit after expanding to $2.87 billion.
While the bank has been pumping more capital into its Australian business this year, Mr Smith said its capacity to do this was limited by weak domestic credit growth.
The result suggests NAB and Westpac, which report their profits over the coming week, are also generating strong profits from their domestic businesses.
In a sign of the challenge facing ANZ's expansion, profits from Asia-Pacific, Europe and America were 15.6 per cent of group earnings, well below the 25 to 30 per cent target for 2017.
At the same time, its Asia-heavy institutional business had a strong September half, with profits rising 15 per cent to $2.4 billion, and margins were not squeezed as much as analysts had feared.
But debate about ANZ's Asia plans is likely to continue, as the full effects of the push may not be clear for years to come.