World in crisis but outlook in Asia optimistic, says bank chief
MELBOURNE: The world economy is on the edge of another economic crisis because the US and Europe have not shown leadership, ANZ chief executive Mike Smith says.
But Smith, whose bank has a stake in Malaysia’s AmBank Group, is focusing on Asia to drive profit growth and remains optimistic for the outlook in the Asia-Pacific region.
“The fact is that we are incredibly well positioned because of our linkage to Asia, which remains the best performing part of the global economy,” he is reported by the Australian Associated Press as saying.
He said policymakers in Europe and the US have failed in dealing with massive debt problems and risks, causing serious financial and social pain around the world.
“That’s created further concern to what was already a pretty fragile recovery,” he said while delivering a trading update for ANZ here today.
The significant falls on world equity markets, which continued overnight and locally today, showed investors were concerned about weaker economic growth being a reality for most advanced economies, he said.
Meanwhile, ANZ Bank is on track to achieve full-year earnings growth of 17% to another record profit.
Smith said ANZ had good earnings momentum in all of its divisions during its third quarter to June 30, 2011 except for the investment markets exposed to institutional business.
He said credit demand remained weak but business lending was expected to pick up in 2012.
An underlying profit of A$1.4 billion was booked in the three-month period to June 30, taking underlying profit for the nine months to A$4.2 billion, up 16% from the previous corresponding period.
Underlying profit is the bank’s preferred measure of profit as it takes into account any one-off effects in the value of non-cash assets.
Smith said Europe’s economic woes meant many banks would earn less than their cost of capital and this could provide ANZ with opportunities to further its Asian growth strategy.
“At some stage some of them will probably have to sell their family silver, which is the Asian assets. Well I hope, anyway,” he said.
He remained cautiously optimistic about the economic outlook for the bank’s key markets.
“The Australian economy is in pretty good shape despite the short-term challenges.
“I am confident about the long-term opportunities for Australia and for New Zealand because of our linkage to Asia,” he said.