Australia and New Zealand Banking Group, ANZ, has reported steady growth in earnings as the economy recoups. It is speculated that it may tie up with wealth manager AMP.

ANZ's 16% increase in October-January profit, along with good interest margins and a sharp fall in bad debts, raised the prospects for broker earnings upgrades and drove the stock up 4%.

Paul Xiradis, Chief Executive at Fund Manager Ausbil Dexia said, "The numbers surprised us. While they joined others in pointing to a peak in bad debts, net interest margin improvement was positive".

He said that investors will have to raise their 2009-10 earnings expectations by at least 10%.

Meanwhile, ANZ Chief Executive Mike Smith told Reuters that at present, the bank is not in talks with wealth manager AMP over any tie-up, but it is looking out for takeover opportunities as part of its Asian growth strategy.

Australia's 'Big Four' lenders have said the bad debt threat is waning, but slow loans growth, global volatility and increasing funding costs remain short-term risks.

Of the four, only National Australia Bank reported flat profits in the recent round of updates.

Smith, who expects ANZ to earn one-fifth of its profits from Asia in a few years, said he would like the group to be present in Thailand and grow its institutional business in Japan and South Korea.