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anz statement

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    Very upbeat, not worried about exposure to CNP?

    ANZ says profit growth on track
    18/02/2008 9:29 AM
    Page 1
    ANZ Banking Group Ltd says its annual profit growth before provisions is on track to exceed the 11.5 per cent achieved in 2007, and that it has no direct exposure to the United States sub-prime loan sector.

    However, the bank said it expected its profit growth will be offset by higher provisions associated with the changing global credit environment.

    "We are progressing well but as previously warned we have not been immune from global market issues, including uncertainty around funding costs," chief executive Mike Smith said.

    "However the current turmoil also presents some opportunities to build our business for the longer term, which should help outweigh any shorter term issues."

    The bank's increases in provisions include an individual provision of $US200 million ($A220.2 million) on a derivative position with a US monoline insurer which has been downgraded to non-investment grade.

    It is likely a substantial portion of this provision will be written back in future periods, the bank said.

    The bank has achieved strong growth in last 12 months in lending, which has risen by 17 per cent and deposits, which are 23 per cent higher than in the prior corresponding period, it said.

    However, Mr Smith said the global market credit crisis created a higher level of uncertainty.

    "ANZ's underlying business is in good shape with growth in profit before provisions being driven by strong revenue growth, while the balance sheet has a conservative funding profile and high level of collective provision coverage," Mr Smith said.

    "While the Australian economy is expected to remain strong, the ongoing instability in global credit markets adds a higher than normal level of uncertainty."

    The bank said it has raised term wholesale funding of $12 billion and is on track to meet its full year term funding target of at least $25 billion.

    "While there has been no material change to the 2008 term funding program, the cost of this term funding has increased significantly," it said.

    "These increased funding costs have only been partially offset by higher interest rates for customer lending."

    Aside from its exposure to the US monoline insurer, the bank said its commercial credit portfolio remained "in good shape overall".

    "A number of reviews have been conducted on key parts of the portfolio which could be impacted by the turmoil and ANZ is comfortable with the overall health of those portfolios," it said.

    As well, consumer credit quality in Australia has remained solid with low arrears and actual losses modestly below initial expectations, it said.

    The health of the consumer market was reflected in credit card arrears being 5 basis points below levels 12 months ago, high rates of deposit growth, and higher than normal principal repayments on mortgages which have partly offset a high level of new approvals, it said.

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