SYDNEY: Australia and New Zealand Banking Group Ltd (ANZ) said on Tuesday its first-quarter margins shrunk and trading income fell due to tumbling commodities prices, sending its shares sliding to their biggest one-day fall in 15 months.
The drop in global markets trading income and margins raises concerns about future earnings at Australia's third-largest bank by assets, especially since ANZ is aiming to focus on Asia and double the proportion of its earnings from outside Australia and New Zealand to 30 percent by 2017.
Group net interest margins, a core measure of a bank's profitability, fell 6 basis points at the end of December compared with the end of September, ANZ said in a brief update.
"Their Asian strategy is the biggest concern on the stock at the moment," said Omkar Joshi, who helps oversee A$1 billion as an investment analyst at Watermark Funds Management, which owned ANZ shares as of end-June.
"The fact that capital is stuck in there, they've got lot of these subsidiaries, minority stakes in Asia. And Asia is a very competitive market," said Joshi, adding that he favours ANZ the least among the "big four" Australian banks after Tuesday's trading update.
Cash profit rose 3.5 percent to A$1.79 billion ($1.39 billion) for the three months to Dec. 31, compared with A$1.73 billion a year ago, led by strong growth in Australia and New Zealand.
Bad loan provisions were at A$232 million for the quarter, up from A$191 million a year ago.
"The world has entered a lower growth phase. For the banking industry globally the issue will be about revenue growth. That will be the big challenge," Chief Executive Mike Smith said in the update.
Revenue for October-December was above the quarterly average of A$4.89 billion for the year ended September, while expenses were also higher than the quarterly average of A$2.19 billion, the bank said, without providing specific figures.
The bank's global markets business was facing challenging conditions, Smith said, "although we expect this to improve through the year".
ANZ shares fell as much as 3.7 percent on Tuesday, their biggest daily fall since Nov. 2013, before erasing some of the losses to be down 2.3 percent at A$35.05 in a slightly weak Sydney market.
Australian banks do not disclose detailed quarterly numbers. ANZ will next announce first-half results in May.
Earlier this month, National Australia Bank posted a 6 percent rise in first-quarter cash profit while Commonwealth Bank of Australia's first-half cash profit rose 8 percent.
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