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ANZ Banking Group (ANZ) chairman Charles Goode said the group would enjoy tailwinds from the recovering economies in Australia and New Zealand. At the group’s AGM today, he also flagged improved net interest margins and lower provisions for bad doubtful debts.

“At ANZ the level of provisions for doubtful debts should fall in the year ahead and more significantly in 2011,” he said.

He added that net profits should be higher in the year ahead. However, Mr Goode noted that the bank has increased the average weighted number of shares on issue by 14%, diluting earnings and adversely affecting the growth in earnings per share.

Beyond the higher share count, he also flagged a number of other headwinds the bank would face in the year ahead.

These include uncertainty about whether our Global Markets business can continue to perform as well, continued high level of doubtful debts in New Zealand and the impact of a higher Australian dollar.

Mr Goode noted that the bank was well capitalised with a Tier 1 ratio of 10% after allowing for acquisitions ANZ has announced and the recent $2 billion preference issue.

Despite the strength of the group’s capital position the improving economic backdrop, Mr Goode said ANZ was unlikely to return capital to shareholders.

“In the new regulatory environment, we will need higher capital than we have historically held, and with our expansionary aspirations, I cannot see capital buy-backs,” he said.

In regards to the new regulatory landscape the is beginning to take shape, Mr Goode said caution and balance must be applied when introducing new requirements, and any such requirements need to be phased in gradually as the economy returns, over time, to its former robust state.

He said the new requirements were likely to include higher overall Tier 1 capital, liquidity tests and an overall gearing ratio.

At 1215 AEST, ANZ shares were down 15c to $21.43.

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