ANZ profit slumps, NZ central bank cuts rates, Babcock & Brown up for sale: Economy roundup

With Australia’s sharemarket falling by more than 3% again this morning, all eyes were on ANZ bank’s profit announcement for some clues about the bank’s outlook for the Australian economy.

With Australia’s sharemarket falling by more than 3% again this morning, all eyes were on ANZ bank’s profit announcement for some clues about the bank’s outlook for the Australian economy.

ANZ’s cash profit for the 12 months to 30 September fell 23% to $3.029 billion, after its bottom line was hit by charges related to the fall-out in global credit markets.

In more evidence of the pressure lenders are starting to feel, the bank increased its credit impairment charges for bad and doubtful debts by $1.426 billion to $1.948 billion. ANZ also took a $700 million charge for credit risk on derivatives.

Chief executive Mike Smith warned of tough times ahead, but reassured investors that Australia could dodge a recession.

“We will not go into recession; we will definitely slow on the back of the global slowdown, but it’s better to be aligned with China and Asia than with the US or Europe,” Smith says.

Meanwhile, struggling investment bank Babcock & Brown has confirmed it is effectively on the selling block by saying it is considering expressions of interest from groups wanting to establish a “strategic relationship” with the investment group.

In a statement to the ASX, the group says the consideration process may extend to next year, but there is no certainty an agreement will be made.

“No formal timetable for resolution of any agreement has yet been determined, although Babcock & Brown would expect the process to continue into the new year,” the group says.

In more worrying corporate news, construction and infrastructure group Transfield Services has cut its forecast net profit growth for fiscal 2009 to the lower end of 10% to 20% due to deteriorating global economic conditions.

Finally, the Reserve Bank of New Zealand has slashed its official interest rate by 1% to 6.5%, the third cut since July. It is the biggest cut to the official rate since the rate was instituted in 1999.

The RBNZ says tight credit conditions and market turmoil called for sharply lower rates.