ANZ Banking Group chief Shayne Elliott says his overhaul of the business is starting to pay off, after a strong first quarter in which profits rebounded by nearly a third to $2 billion compared with a weak period last year.
Mr Elliott on Friday also signalled its charges for bad debts were on track to be lower than previously thought, after a stronger December quarter and first six weeks of 2017.
In a trading update on Friday, ANZ said its cash profit rose 31 per cent, after the same quarter last year experienced heavy write-downs. Excluding one-off items, it said earnings were still up 20 per cent year on year.
The result showed revenue was up 7 per cent, while its expenses fell 4 per cent, after its management focused on shedding costs and less profitable businesses.
Related Content
After the quarter and the first six weeks of this year, Mr Elliott said his strategy of putting more capital into its highest-return businesses was starting to deliver for shareholders. Mr Elliott took over from previous boss Mike Smith in early 2016.
"The first quarter saw a positive start to the year. There was further momentum in executing out strategy to build a simpler, better balanced and fairer bank that more consistently meets customer expectations, and delivers improved shareholder returns."
ANZ's domestic retail and commercial bank performed "well", ANZ said, with business deposits up 6 per cent and household deposits increasing by 4 per cent.
It said Apple Pay, which large rivals are not providing, and Android Pay, were helping it win more transaction bank accounts.
ANZ's institutional arm, which has been shedding less profitable customers, lowered its risk-weighted assets by a further $900 million in the quarter, while its markets division benefited from rising bond yields.
Banks are also facing pressure to build up balance sheet strength, and ANZ's core equity tier one ratio was 9.5 per cent.
The bank said its net interest margin, which compares what banks charge for loans with their cost of funds, had narrowed by "several basis points".
Mr Elliott, who has put a greater emphasis on domestic retail and commercial banking while selling performing assets, said the bank had increased its market share in household deposits and home loans in the quarter.
Mr Elliott said the bank had more to do on costs, arguing that cutting expenses was the only way the bank would be able to invest in technology needed to meet customers' needs.
On credit quality, the bank had previously said it expected the proportion of loans going bad to stay at levels of last year, but Mr Elliott said it now looked like this would be "marginally" lower.
"It is still too early to be definitive about the year as a whole, however, the first quarter, together with our experience during first six weeks of the second quarter, suggests the credit environment is marginally better than we expected at the time of our 2016 full-year result which was for the provision charge in 2017 to remain broadly the same as a percentage of gross lending assets," he said in a statement.