head and shoulders

For the tech minded Anz is forming a head and shoulders pattern on the weekly chart. ANZ predicts slower profit growth in 2007

15dec06

ANZ Banking Group Ltd says it does not expect growth in net profit in the 2007 year to be as strong as 2006 given the likelihood of significantly higher loan loss provisions.


ANZ (anz.ASX:Quote,News) chairman Charles Goode said the environment for banking was expected to be supportive in the year ahead, but new accounting standards meant that there would be more volatility in results because of the treatment of provisions.

"Overall the outlook for 2007 remains positive and while we expect it to be a good year for revenue, we do not expect the growth in profit after tax to be as strong as 2006 given the likelihood of significantly higher loan loss provisions,'' Mr Goode said in an address to ANZ's annual general meeting.

Australia's third largest bank reported a 16 per cent lift in annual net profit to a record $3.69 billion in the year ended September 30, 2006.

Its cash profit rose 13.8 per cent to $3.59 billion.

In the year ahead, Mr Goode said Australian earnings growth was unlikely to exceed 2006 levels.

"Conditions in Australia should still be conducive to reasonable earnings growth although it is unlikely to exceed 2006 levels,'' he said.

"New Zealand's economy may well be softer over the next two years, but we remain confident of the long term future of our New Zealand business.''

Mr Goode said provisions for loan losses were low in 2006 and benefited from the recovery of previously-made loan provisions.

"We can not expect our loan loss provisions to continue at this low level,'' he said.

The adoption of the new Australian international financial reporting standards would make a significant difference to the ability of all banks to give predictions because of the wider variations in provisioning, he said.

He said that under AIFRS, when there is a downturn in the future not only would the bank's individual loan provisions rise but there it will also have to increase its collective provision.

Under the new accounting standards there will be more volatility in the results that will be reported to shareholders than has historically been the case, he said.

Mr Goode also said ANZ was committed to keeping its call centres in Australia.

"We understand that our Australian customers prefer to deal with someone at a call centre in Australia and we have committed to maintain all our customer call centres here,'' he said.