Australian banks, and their New Zealand arms, are likely to come in for criticism again if they continue with the trend set yesterday by ANZ Banking Group, which reported a record half-year profit.
However, the profit needed to be understood, according to Craigs Investment Partners broker Chris Timms.
"They are still big numbers but the increased profits will not be due just to what has happened in the last six months. The numbers could relate to provisions made for bad debt three and four years ago and are now being unwound."
ANZ Group, in Australia and New Zealand, had given a much improved outlook for bad debt.
While the group's underlying profit had risen significantly, the provisioning for bad debt had fallen by a similar amount, he said. Also, ANZ was showing growth in its corporate lending, particularly to the mining sector in Australia.
In New Zealand, commercial business grew significantly to $286 million from $102 million in the previous corresponding period (pcp), Mr Timms said.
The Group net profit rose to $A2.7 billion ($NZ3.61 billion) for the six months ended March from $A1.92 billion in the pcp - a 40% increase.
The Melbourne-based ANZ, which owns ANZ New Zealand and the National Bank, declared an interim dividend of A64c a share, tax paid, up from A52c last year. ANZ's return on equity reached 16.7%, up from 12.2% in the previous corresponding period.
In New Zealand, ANZ reported a 63% increase in profit before tax to $NZ850 million compared with $522 million in the pcp. The underlying profit was $605 million, also up 63% on the pcp.
The cash profit, after stripping out the provision for bad debt, was up 24% to $478 million.
The improved profit comparing the two March quarters came from revenue of $1.69 billion this year compared with $1.58 billion, a 7% increase.
ANZ NZ chief executive officer David Hisco said in a statement that the bank's stronger business performance reflected a lift in operating income of 4%, tight cost control, a 4% increase in customer satisfaction for ANZ and a significant decrease in provisioning for credit impairment of 35% as the economy recovered.
The ANZ Group result beat consensus estimates for its underlying earnings but its performance was lower than market expectations on its statutory profit, interim dividend and return on equity.
Provision for bad debts plunged to $A675 million, a 38% fall from a year earlier.
ANZ chief executive Mike Smith said overall lending growth in Australia would be lower, despite ANZ seeing an increase in corporate lending demand.
While the housing market was not in a bubble, housing affordability in Australia was still a concern.
"There is a lot of heat in the resources side of the economy, but consumers and households are doing it tougher," he said.
There was a danger more rate rises could stall the Australian economy.
The high Australian dollar was doing the work of the central bank and there were flat spots in the economy where industries were being hurt by the local currency.
"These industries will hve to review their business models," Mr Smith said.
Mr Timms expected that other Australian banks would report improved results and he would be looking for improved short-term outlooks for corporate lending and bad debts.
ANZ had flagged that lower credit growth was part of the operating environment and that the bank was expecting growth to slow, he said.
Today, Westpac will report its half-year result, with Forsyth Barr picking an increase in net profit of $A3 billion, broadly in line with consensus and slightly lower than the rate implied at Westpac's first quarter trading update at $A1.55 billion.
Tomorrow, National Australia Bank, the owner of BNZ in New Zealand, reports its interim profit. Forsyth Barr is forecasting first-half cash earnings of $A2.5 billion, in line with the consensus.
