SYDNEY, Australia — Australia & New Zealand Banking Group Ltd. reported a 21 percent decline in annual profit Thursday as soaring charges for bad debts linked to the global credit crisis hit Australia's fourth-largest bank hard.
It was the first time in a decade that ANZ profits shrank _ a measure of the turnaround in banking fortunes since the credit crunch began to bite earlier this year.
Net income plunged to 3.3 billion Australian dollars (US$2.2 billion) in the 12 months through Sept. 30, from A$4.2 billion (US$2.8 billion) a year earlier, the Melbourne-based bank said in a statement.
The bank was hit by a A$1.4 billion (US$941 million) increase in credit impairment charges on lending to A$1.9 billion (US$1.3 billion) and a A$700 million (US$470 million) charge for credit risk on derivatives.
The performances of Australian banks are being watched closely by investors for signs of how international market turmoil and the global economic slowdown will affect them. Earlier this week, rival National Australia Bank Ltd. _ the country's largest bank by assets _ reported a 1 percent drop in annual profit and sharply rising levels of bad debts.
ANZ shares dropped 5.21 percent to close at A$18.01, a fall that exceeded an ugly day on the markets when the leading index fell more than 4 percent.
"I believe we have delivered a reasonable result in difficult circumstances in 2008," Chief Executive Mike Smith said in a conference call with investors. "2009 is going to be another difficult year as the economy softens, but we are on a better footing, we're better prepared than we were 12 months ago, and I believe we have a good future."
Cash profit was down 23 percent to A$3 billion (US$2 billion) while revenue was up 4 percent to A$11.5 billion (US$7.7 billion).
Smith told investors that Australia is better positioned to deal with the financial crisis than other countries and would not slip into a recession. But he acknowledged it would be a rocky few years.
"We believe it will take two or three years for the world to work through this international crisis and the economic effects that will flow from it," he said. "There'll be choppy waters along the way, and it's going to be difficult in the global credit markets for some time to come."
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