By Alice Uribe


SYDNEY--Australia and New Zealand Banking Group Ltd. reported a 20% rise in interim profit as the lender increased its home loan processing times in Australia, grew its New Zealand mortgage business, and kept an eye on costs.

The Australian lender on Wednesday said its net profit rose to 3.53 billion Australian dollars (US$2.51 billion) in the six months through March.

"Looking ahead, the economic environment is likely to be very different and we will continue to adjust our risk appetite, business settings and investment priorities as required," said Chief Executive Shayne Elliott.

The Reserve Bank of Australia on Tuesday raised its official cash rate to 0.35%, from a record-low 0.10%. This was the first increase since November 2010, with the RBA signaling more raises were likely in coming months which may have an impact on consumer confidence.

All major banks have now passed on the RBA rate increase in full to variable rate mortgage customers.

Cash earnings--a measure closely tracked by analysts that strips out non-core items such as revenue hedges and treasury shares--rose by 4% to A$3.11 billion. When measured only using continuing operations, ANZ's cash profit was also A$3.11 billion.

ANZ said costs were tightly managed with 'run the bank' expenses coming in flat for the half "with investment focussed on operational resilience and new growth opportunities."

The bank declared a final dividend of A$0.72 per share, compared with A$0.70 a year earlier.

Consensus forecasts compiled by FactSet projected ANZ's first-half profit would be A$2.96 billion, with an interim dividend of A$0.71 per share.

Still, ANZ's net interest margin--the difference between the interest income generated and the amount of interest paid out to lender--was 1.58%, compared to 1.63% a year ago.

Australian bank NIMs have been under pressure amid the low interest rate environment which helped to drive a house price surge in Australia. This has spurred increased competition in the mortgage market between lenders, while also seeing margins squeezed.

"Investments in our home loan processing capacity in Australia drove positive balance sheet momentum while processing times are comparable to our major peers. We are on target to grow in line with the Australian major banks by the end of our financial year but will do so with an eye to our margin performance," said Mr. Elliott.

ANZ's Common equity Tier 1 capital ratio--a key measure of a bank's ability to withstand financial shocks--was 11.5%. But it was 81 basis points lower than the second half of the 2021 fiscal year.

Due to an improvising risk profile, ANZ's total credit provision result for the first half was a net release of A$284 million.

"An improving risk profile during the half drove the collective provision release and is a reflection of both observed portfolio strength and a recognition that some of the more acute risks from the pandemic are receding," said ANZ.


Write to Alice Uribe at alice.uribe@wsj.com


(END) Dow Jones Newswires

05-03-22 1830ET