ANZ Bank forecasts strong growth this year

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Australia and New Zealand Banking Group on Thursday said annual revenue growth would be strong after reporting a record first-half year net profit, driven by buoyant consumer and business borrowing.

Australia?s third-largest lender posted a better-than-expected 16 per cent rise in net profit to A$1.81bn in the six months ended March 31.

Chief executive John McFarlane said annual revenue was likely to grow by more than 8 per cent as industry-wide lending rose 14 per cent in the year ended February.

?We are increasingly confident about the year as a whole,? he said. ?2006 is expected to be a good year.?

Australian banks are benefiting from 15 consecutive years of economic growth and low unemployment that have fuelled credit quality and demand.

Mr McFarlane said expense growth was under control and likely to be toward the bottom end of the bank?s five-to-seven target range for the year.

However credit costs could also rise modestly in the second half of the year, he said.

?While the credit environment remains benign, we envisage a modest increase in credit costs in the second half form a very low base.?

Earnings at ANZ?s Asia Pacific operations increased by 18 per cent to A$46m while its New Zealand business made a profit of A$335m, up 14 per cent.

ANZ consolidated its position as Australia?s leading foreign investor in Asian financial institutions last December with the purchase of a 19.9 per cent stake in China?s Tianjin City Commercial Bank. It is also expected to buy a stake in the former rural co-operative of Shanghai this year.

Mr McFarlane said the bank would look for further opportunities in Asia but Australia and New Zealand would remain the Melbourne-based bank?s focus in the near term, as Asian assets were looking expensive.

He said Asia?s percentage contribution remained relatively low at around 5 per cent because of the rapid growth of the bank?s domestic business.

The chief executive has previously stated he aims to lift Asian earnings as a percentage of total group earnings to around 10 per cent over the next five years.

While the bank was building a low-risk portfolio of investments in Asia, it had no plans to rush its expansion, he added.

?Now is not necessarily the time to splurge lots of money buying things in Asia,? he told an analyst briefing in Sydney, adding that asset prices in the region were ?reasonably hot?.

India remained a ?tantalising prospect? for ANZ, which sold its Grindlays business in India to British bank Standard Chartered for A$2.2bn in 2000.

However the 5 per cent limit on foreign investment in Indian banks remained a disincentive, Mr McFarlane said.

The banking group, which became the biggest lender in New Zealand in 2003 when it paid A$5.4bn for the National Bank of New Zealand, expected the nation?s credit growth to remain strong even though the economy was expected to slow further.

Allan Bollard, governor of New Zealand?s central bank, left interest rates unchanged at 7.25 per cent on Wednesday ? by far the highest rate in the developed world - and reiterated that he saw no scope for cutting rates this year.

Mr McFarlane, who is in his eighth year at the helm of ANZ, told an analysts briefing that he had no plans to retire early and was committed to remaining with the bank until October 2007 at the earliest.

The bank declared an interim dividend of A$0.56 a share, compared to A$0.51 in the previous first half.

Leading commercial banks, Westpac and National Australia Bank, are also expected to report strong interim results in coming weeks.

Commonwealth Bank, the nation?s biggest lender, posted a 13 per cent rise in first-half earnings in February.

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