By Stuart Condie

SYDNEY--Australia and New Zealand Banking Group Ltd. said its annual net profit fell by 40% as it absorbed one-off items including impairment charges related to Covid-19.

Australia's fourth-largest lender by market capitalization on Thursday reported a statutory profit of 3.58 billion Australian dollars ($2.52 billion) for the 12 months ended Sept. 30.

Cash earnings--a measure tracked by analysts that strips out non-core items such as revenue hedges and treasury shares--fell by 41% to A$3.66 billion. When measured using only continuing operations, ANZ's cash profit fell by 42% to A$3.76 billion.

The decrease in earnings was primarily driven by full-year credit impairment charges of A$2.74 billion, reflecting the impact of Covid-19 and a first half impairment of Asian associates of A$815 million, also related to the pandemic, ANZ said.

ANZ's result came two days after the lender surprised analysts by logging A$528 million in additional second-half items including customer remediation charges and accelerated software amortization.

The bank declared a final dividend of A$0.35 per share, compared with A$0.80 a year earlier. Its full-year payout dropped to A$0.60 from A$1.60 in fiscal 2019, having paid a deferred interim dividend of 25 Australian cents on Sept. 30.

Provisions rose from A$795 million a year earlier as ANZ grappled with the impacts of the pandemic and customer remediation.

The bank said almost 10% of Australian mortgage accounts and about 10% of business loan accounts had received a payment deferral, with nearly 5.0% of New Zealand home loan accounts in a similar position.

ANZ's collective provision balance increased to A$5.01 billion at Sept. 30, while its common equity tier 1 capital ratio ticked slightly lower to 11.3% from 11.4%.

Net interest margin, a key measure of profitability, slipped to 1.63% from 1.75% a year earlier.

Chief Executive Shayne Elliott said it was hard to predict fiscal 2021 performance and warned the pandemic's impact on the bank was likely to linger.

"While Covid is having a massive impact on people's lives and the economy, actually at the bank that doesn't really come through in the result for 2020," Mr. Elliott said.

"That may yet come and more likely to have real impacts in 2021."

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

10-28-20 1753ET