Westpac reveals its third quarter trading update this morning to complete the reports from the four big banks.
It will show a similar shape to the other big banks, a fall in provisions, little growth in lending and with gloomy talk about rising funding costs and perhaps concern about the outlook.
The Commonwealth reported a solid rise in full year profit, but spooked the market by being gloomy about the outlook for the next year.
The NAB produced a flat third quarter figure and like the CBA and the ANZ on Friday, the major reasons for the improvement were the better credit conditions and lower bad debt provisions than a year ago.
In fact the ANZ is on track to turn in earnings above $4.5 billion for its current financial year.
In the third quarter update the ANZ said unaudited underlying profit for the nine months to June 30 was $$3.6 billion.
That’s 26% above the figure recorded for the corresponding period last year.
And the unaudited profit for the June quarter was $1.3 billion, up 37% on the same period of the 2009 and due to "modest growth in business earnings and reduced provisions despite lower Global Markets income and USD/AUD exchange rate impacts".
The shares rose 1.7% to $22.78, up 38c on the day.
The ANZ also joined the Commonwealth in saying that growth in recent months has been modest as the recovery in global markets has begun to stall. It also warned that credit growth remains "soft".
The NAB was also cautious about the outlook.
The ANZ revealed that profit performance has been driven by a much lower bad debt charge this quarter.
The bank’s provisioning costs to cover impairments and asset value write-downs was $1.4 billion in the June quarter, 34% lower than the same time last year.
The impact of the lower provisions cane be seen by comparing the 37% rise in after tax profit in the June quarter and the 26% in nine month profit, while income for the nine months was up just 5% before provisioning.
ANZ said that its margins had also grown but only “modestly”.
These increases were also slowing as higher costs in raising money from international credit markets and the competition for deposits among the banks in Australia to try to keep those costs down, ate into its bottom line.
ANZ’s chief executive Mike Smith said in a statement to the ASX that its core businesses were performing well against the backdrop of Australia’s “solid” economic performance, Asia’s continuing growth and the recovery in New Zealand.
He warned that the global outlook remained “unusually uncertain” as a result of companies, consumers and governments cutting back on debt, higher unemployment around the world and tighter regulation of the banking sector.
“Together, they mean global economic growth is not going to rebound quickly. Although Australia and to a lesser extent New Zealand are benefiting from Asia’s strong growth, it’s clear domestic credit growth will continue to be softer than we saw pre-crisis," Mr Smith said.
“We need to accept that banks around the world are facing permanently higher costs.
"These include continuing pressures on wholesale funding and rates for deposits have never been so high compared to short-term wholesale rates.
"There are also going to be significant costs to comply with new international regulation, although the impact of Basel III is likely to be somewhat less onerous than originally expected."
Sounds like he sees the outlook as being tougher to lend money in Australia and greater competition in making those loans and sourcing the deposits to support them.
The bank is trying to expand into Asia to offset expected slower growth here.
It sounds like a discrete warning that profit margins and costs could be moving the wrong way for a while after the positive impact of the fall in bad debt provisioning disappears.
But some banking analysts reckon that the ANZ is positioning itself nicely in its Asian push and could have built a new earnings stream in a years time that will start offsetting the sluggish results from Australia.
