(Bloomberg) -- ANZ Group Holdings Ltd. announced a A$2 billion ($1.3 billion) buyback as first-half earnings missed estimates, continuing the trend of Australian banks handing investors a sweetener as profits decline.

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Cash profit fell 7% to A$3.55 billion in the six months to March 31 from a year earlier, the Melbourne-based lender said in a statement Tuesday. That was short of the A$3.63 billion average projection in a Bloomberg survey of analysts. The bank’s shares fell as much as 2.7% in Sydney trading on Tuesday.

The result is the starkest illustration of a pattern emerging from Australia’s bank earnings season of lenders moderating profit expectations but announcing disbursements of cash back to shareholders. The result follows domestic lending peer Westpac Banking Corp on Monday opting for a A$1 billion buyback, while net income fell 16%. National Australia Bank Ltd similarly said it planned a $1 billion share buyback as cash earnings fell 13% last Thursday.

“Both the domestic and international environments are expected to remain challenging across the remainder of the year,” Chief Executive Officer Shayne Elliott said in the statement. “Despite these conditions, we are well positioned with the diversity of our businesses, prudent management, and the strength of our customers holding us in good stead.”

ANZ’s net interest margins — the core difference in banking between rates payed to depositors compared to the average loan rate written — fell to 1.56% from 1.75% in the prior year, short of the analyst estimate of 1.62%. The slip contributed to a drop in total net interest income of A$597 million, the bank said.

Investors are scrutinizing two pillars of growth for ANZ after the bank won its fight to buy Suncorp Group Ltd.’s banking arm at the same time as it’s been growing its exposure in Asian markets such as India.

“Our preparations to integrate Suncorp Bank are well advanced,” Elliott said. “While the time taken to progress the necessary approvals has taken longer than anticipated, we have used that time productively and we are more confident than ever about the benefits that will follow.”

The bank is cashed up from the partial sale of its stake in Malaysia’s AMMB Holdings Bhd., which netted the bank A$668 million and the passing on of which will be included in the buyback, the bank said.



“Overall, we think it’s a fairly neutral result, with a focus on normalizing markets revenues and the level of investment spend,” Citigroup Inc. analyst Brendan Sproules wrote in a note to clients. “While investment spend is rising at all the banks, we think ANZ’s spend is above peers, and the market will increasingly focus on the economics in retail where the spend is predominantly directed.”

(Adds share reaction in paragraph 2 and analyst commentary)

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