New Loans Lift Bml Earnings To $84m

Bank of Melbourne has shrugged off the competition in the home lending market to report a 17.1 per cent increase in profit to $84.1 million.

The result, which covers the year to June, was described by the bank's managing director, Mr David Airey, as outstanding, with almost every key performance indicator showing improvement on last year.

BML declared a fully franked final dividend of 24 cents, up one cent from last year, taking the full-year dividend to 47 cents, a five cent increase.

The market responded positively to the announcement, marking the bank's shares up 13 cents to $7.95.

Underlying profit, which excludes taxation, abnormal items and bad debts expense, improved 12 per cent to $154.5 million.

BML returned 17.5 per cent on average shareholders' funds, up from 16.9 per cent last year.

The profit was underpinned by $2.5 billion in new lending, up 21.5 per cent for the year, close to 55 per cent of which was achieved in the second half.

Mr Airey said competition in the Victorian home lending market was intense, but contrary to popular opinion, banks rather than mortgage originators were the ones applying the pressure.

Bad debts expense was 66 per cent lower at $10.76 million, but Mr Airey said he was confident the bank's asset quality could be maintained.

The bank's commercial lending portfolio grew by $191 million, with total assets in the sector now topping $1 billion and making up 13 per cent of loans.

BML's interstate operation, comprising single branches in Sydney, Brisbane, Adelaide and Perth, was now writing 32 per cent of new business, Mr Airey said.

BML achieved a cost-to-income ratio of 51.7 per cent, down from 52 per cent last year, the best performance of any Australian bank.

Mr Airey said there was still scope for cost efficencies in the next two years.

The bank's acquisition of Challenge Bank's Victorian assets from Westpac was going ahead according to schedule, with the formal transfer due on 1 October. BML had been managing the assets since May, with deposits steady and lending approvals up by about 20 per cent, Mr Airey said. The bank had assets of $9.2 billion at balance date, with a further $1.3 billion accruing once the Challenge deal is completed.

BANK OF MELBOURNE.

* Net profit up 17.1% to $84.1 million.

* Final dividend of 24 (fully franked).

* Result driven by $2.5 billion in new lending.