ANZ profit slumps 5 per cent on back of royal commission

ANZ Bank has delivered a 5 per cent dip in its annual cash profit, to $6.5 billion, as earnings were weighed down by higher compensation and compliance costs from the royal commission into financial misconduct.

ANZ boss Shayne Elliott says it's a 'tough' revenue environment for banks at the moment.Credit:Vince Caligiuri

Kicking off a round of annual profit results from three of the big four banks, ANZ on Wednesday said its cash profit dipped 5 per cent when measured on its continuing operations.

ANZ is selling various wealth business, and profits fell by a sharper 16 per cent to $5.8 billion when its discontinued operations are included.

The results showed net interest income was down 3 per cent, and its profits before taking into account low charges for bad loans was down 8 per cent.

The very low number of bad and doubtful debts supported its bottom line, with provisions for bad debts at just 0.12 per cent of gross loans and acceptances, down from 0.21 per cent last year.

The result was dragged down after ANZ this month announced it would take a $377 million charge for customer refunds and related costs. It also said its external legal costs from the royal commission were $55 million for the financial year.

Chief executive Shayne Elliott said the bank had been targeting home loan customers seeking to buy a home to live in, as opposed to property investors, and this had cost the bank revenue.

ANZ's cash profit for the year ended September 30 slumped 5 per cent.Credit:Ken Irwin

“Retail banking in Australia faced strong headwinds with housing growth slowing and borrowing capacity reducing. We continued our disciplined approach to home loan growth by focusing on customers who want to buy and own their own home," Mr Elliott said.

“While this meant we sacrificed short-term revenue growth and higher margins in Australia, particularly in the investor and interest-only segments, it was the right thing to do for shareholders.

Mr Elliott said the revenue environment for banks was "tough," and he expected this to continue for the foreseeable future. Under Mr Elliott, ANZ has been shedding lower-returning such as various Asian businesses and its wealth management arm in Australia.

“The work we began in 2016 to simplify our business, better focus on customers, improve our cost base and significantly improve our capital position, along with our exposure to international trade, puts us in a good position to manage any challenges ahead,” Mr Elliott said.

It kept its second half dividend unchanged at 80c a share.

Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.

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