EUROPEAN banks are flush with cash thanks to the €1 trillion ($1.2 trillion) injection into their troubled banking system, said the chief executive of ANZ, Mike Smith.
This was threatening to distort competition in business banking across Asia and Australia while simply delaying the willingness of some Europe-based banks to tackle their own problems, he said.
''What we saw in the last year the European banks had pulled right back from playing in this part of the world. They were selling assets to raise capital to fix up up their balance sheets,'' Mr Smith said. He said the cheap three-year loans provided by the European Central Bank since December provided a substantial funding in Europe's banking system.
''We're seeing them back,'' Mr Smith said. ''There has been a fundamental shift in the market.''
Recent figures by the Bank for International Settlements said Europe's stressed banks pulled a further $US16.6 billion from Australia towards the end of last year, as they felt the funding squeeze at home.
Mr Smith said the global economy was ''halfway'' through the workout phase of the financial crisis, although he said ANZ was well positioned to capture the fast-paced growth generated from Asia.
He was speaking as ANZ delivered a 6 per cent increase in first-half profit to $2.97 billion.
Net profit rose on improving results from its operations in Asia and the Pacific, although Mr Smith warned the key Australian business was seeing slower demand for loans and higher funding costs.
ANZ's shares yesterday fell 19¢ to $23.80 amid concern over pressure on Australian profit margins.
Although bad debt charges across ANZ fell away, Mr Smith said parts of the economy outside the resources sector were struggling.
Helped by major job cuts in Australia, ANZ's cost growth of 3 per cent in the March half came below overall revenue growth of 4 per cent.
Investors are still seeing volatility on return on equity. In ANZ's case, it came in at 15.9 per cent for the half, down from 16.7 per cent this time last year.