Heightened Asian volatility sees ANZ bank flag higher credit charge

Asia-exposed Australia and New Zealand Banking Group warned slowing growth and heightened volatility in the Asia Pacific could lead to a higher bad debt charge as it reported a 4 percent rise in first quarter unaudited cash profit.

Unaudited cash profit stood at 1.85 billion Australian dollars (1.31 billion U.S. dollars) for the three months to 31 Dec. 2015, ANZ said in its quarter trading update released on Wednesday, for a statutory net profit of 1.6 billion Australian dollars (1.14 billion U.S. dollars).

Australia's fourth ranked lender however flagged a higher group credit charge of over 800 million Australian dollars, compared with market consensus of 735 million Australian dollars for the six months to March 31, primarily due to the economic slowdown in Asia.

ANZ is the only one of Australia's big four banks to have made a push into the Asian region, with slowdown exposure focused on its short tenor, investment grade lending.

"The slowdown in the region and increased market volatility are seeing credit conditions become more difficult in the second quarter," ANZ chief executive Shayne Elliott said in a statement.

Elliot said the bank's China business remains steady with the impact primarily in manufacturing and trade exposed sectors in the Asia Pacific, notably Indonesia.

"And that absolutely is having impact in terms of our credit books. And we've started to see that in the recent weeks and we've flagged that in our result update," Elliot said in a video interview discussing the Q1 trade update published on the bank's website.

ANZ said income growth outstripped expenses over the quarter, with technology investment and wage inflation largely offset by a 2.5 percent reduction in staff.

The bank's retail arm also gained market share in key home lending markets, while small business lending grew strongly in both Australia and New Zealand as the lender increases its domestic focus for faster growth and attractive returns. Endit