ANZ emphasis changes

Press, 19 December 1985, Page 34

ANZ emphasis changes

PA Wellington The changes of fortune of financial institutions are clearly shown in the ANZ Banking Group’s annual report, with a 43 per cent lift in profit for its trading bank, but a 13.5 per cent drop in profit for its finance company subsidiary, UDC Finance. The figures reflect the gains trading banks have made under the financial de-regula-tion of the present Government, and the harder conditions faced by finance' companies which had benefited from the restrictive regulations of the previous Government. The trading bank’s operating profit, excluding dividends and after tax, rose from $47,418,000 in 1984 to $68,002,000 in 1985, a lift of 43.4 per cent. UDC’s post-tax operating profit fell 13.5 per cent from $8,305,000 in 1984 to $7,185,000. In a general reference to the change of fortunes, the chairman, Mr Lyn Papps, said the lifting of “the burden of regulation” had improved banks’ competitiveness and allowed them to develop services. “As a consequence, the share of financial intermediation, lost to the non-banking institutions during the period of deposit and lending interest rate controls, is being regained,” he said. Now facing competition

themselves from new banks, with the Government’s proposal to open up banking licences, ANZ urged the Government to set high standards for new bank entry and to adopt firm prudential management policies to ensure that public and international confidence in the New Zealand banking system is maintained.

Over all for the year, ANZ’s group operating profit showed a rise of almost 31 per cent to $78,188,000 ($59,735,000). But an adjustment of the bank’s doubtful-debt accounting policy meant the comparison looked less favourable, with a rise of just 10 per cent in profit. Mr Papps explained the adjustment as a move to bring ANZ’s doubtful-debt accounting policy into line with accepted international practice. In effect, the bank would no longer spread its provision for doubtful debt on the basis of the current and preceding four years, as it had done in the past. Instead, it had decided to charge bad debt to the current year only. The change had two consequences: @ An abnormal credit item of $13,260,000, reflecting surplus general provision balances as at September 30, 1984. © A reduction of $1,365,000 in the charge for general provision, being the effect on the

current year’s results. Mr Papps said comparison of trading performance was best made with the 1984 result adjusted for the accounting change and by excluding the abnormal item of $13,260,000 from the 1985 profit This meant the 1985 consolidated tax-paid operating profit was $64,928,000 compared with $58,886,000 in 1984 - an increase of 10 per cent “This growth rate, or operating profit, is below that of recent years but, nevertheless, the result is acceptable in view of the volatile interest rate conditions and very competitive markets which typified the yeats,” Mr Papps said. “Earnings per share and the return on shareholders’ funds were both maintained at a high level.” Figures in the annual report show, however that, while the return on shareholders’ funds rose from 29.7 per cent in 1984 to 31 per cent in 1985, the group’s earnings a 50c share dropped from 44.9 c to 41.8 c. The consolidated operating profit before tax showed a rise of 20.7 per cent to $131,308,000 ($108,799,000), and tax expenses rose 6.1 per cent to $53,120,000 ($50,047,000). The group’s savings bank, smaller than its trading bank and finance company wings, showed a rise in tax-paid operating profit of 14.6 per cent to $2,799,000 ($2,443,000).