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ANZ Bank's profits drop 3 percent

ANZ Bank’s profits drop 3 percent

(8 August 2016 – Australia) ANZ Bank’s reported a three percent drop in cash profit the first nine months of its financial year, however said third quarter net interest margins were stable and bad debt provisions remained in line with the average of the previous six months.

The bank’s cash profit fell to A$5.2 billion for the nine months to 30 June, impacted by restructuring charges and bad debts. The bank had made provisions of $A1.4 billion so for in its financial year.

Profit before provisions rose five percent for the period, it said in its quarterly trading update.

Under new chief executive, Shayne Elliot, the bank has been focusing on cutting costs and restructuring its balance sheet by exiting riskier assets. Elliott underlined that strategy further on Tuesday.

"There's going to be a little bit of balance sheet shrinkage in Asia at the moment," Elliott said in a statement.

"A lot of that is to do with the fact that commodity prices are down and therefore the value of what we are financing has come down naturally."

The bank reported a A$15 billion reduction in risk-weighted assets over the nine months to June. It flagged margin pressures in its retail and commercial businesses, but said margins remained stable thanks to gains in its institutional business.

ANZ said its retail and commercial business in Australia and New Zealand had performed well despite competition in the mortgage market putting pressure on banks' lending margins."

"Small business banking remains an area of good growth in both markets, while conditions in corporate and business banking remained highly competitive."

According to Martin Smith, Head of Markets Analysis at East & Partners, the bank’s market share growth in Asia has tapered in the last six months in line with the group’s shift to a more consolidated “super regional strategy”.

Smith said that the recent research from East & Partners’ Asia Institutional Transaction Program showed that “one in two CFOs among Asia’s largest corporates nominated either StanChart, Citi or HSBC as their primary transaction bank in May 2016”.

“The “Big Three” are just as dominant as the Big Four Australian banks in domestic Australian markets,” he said.

Smith added that as recently as 2012, ANZ did not register as a primary transaction banker in the Asia programs however the bank is now bracketed with other major transaction banks in the region such as UOB, Hang Seng and BAML in terms of primary transaction banking market share.

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