One of Australia's largest banks, ANZ Banking Group, on Thursday posted a 19 percent rise in annual profit to 5.36 billion Australian dollars ($5.54 billion), boosted by a fall in bad debts. Australian banks proved resilient against the global economic downturn and remain among a handful of banks in the world to maintain a AA credit rating.
The Melbourne-based company said its highest ever net profit for the year to Sept. 30 was up from AU$4.5 billion in the previous 12 months. A 31 percent drop in ANZ's provision for bad debts to AU$1.24 billion boosted the net profit, while all divisions posted profit growth.
But ANZ's operating income fell in the second half of the year, due to subdued global markets, chief executive Mike Smith said. "The global economic situation saw trading conditions for our markets business deteriorate significantly," he said in a statement.
"This more difficult operating environment -- characterized by ongoing economic volatility, cautious consumer and business behavior, and higher funding and capital costs for banks globally -- is likely to be with us for some time," he added.
Smith forecast global market volatility to continue for the next two years. Rival bank Westpac Banking Corp. on Wednesday posted a 10 percent increase in profit to AU$6.99 billion, the largest yearly profit ever achieved by an Australian bank.
ANZ shares lost a fraction of a percentage point to AU$20.59 after the news, while the broader Australian market opened higher on Thursday.
ANZ has the largest institutional division of the four dominant Australian banks. Its institutional division profit rose by 9 percent to AU$1.895 billion, despite a fall in income during the second half of the year in its global markets business.
Its Australian division posted a profit of AU$2.78 billion in the year through September, up 2 percent from the previous year. The Asia Pacific, Europe and America division increased profit by 16 percent to AU$721 million, as ANZ's Asian expansion continues.
Global markets income fell by 28 percent from the previous year because of volatility and the bank's decision to be risk averse.
"Market conditions have been incredibly difficult in the last quarter," Smith said. "It was very hard to read these markets and we ... maintained a risk-off strategy."
"That's now changed and ... the first month of the year has been a very good result," he added.
ANZ increased the size of its loans and advances by 8 percent from the previous year to AU$397.3 billion, while customer deposits were up by 16 percent to AU$298.8 billion, the bank said.
Smith said Australia's economy remained multi-speed and the housing market was expected to be flat for some time. He said he expected credit growth in fiscal 2012 to be similar to that experienced in fiscal 2011.