(Reuters) -ANZ Group on Tuesday unveiled a new A$2 billion ($1.32 billion) share buyback after the bank's first-half cash earnings largely met analyst estimates, but flagged its concerns about challenges in Australian and global economies.

Cash profit fell 7% to A$3.55 billion ($2.35 billion) for the six months ended March 31, only slightly above a Visible Alpha consensus estimate, compiled by UBS, of A$3.54 billion.

"Both the domestic and international environments are expected to remain challenging across the remainder of the year," ANZ CEO Shayne Elliott said.

"The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally."

ANZ shares fell 2.3% in early trade, underperforming the broader market.

With its new buy-back programme, ANZ follows suit with its larger rivals National Australia Bank and Westpac to return capital to shareholders despite a declining profit as its balance sheet remains supportive.

ANZ also completed the partial sale of its stake in Malaysia's AmBank, releasing A$668 million in capital which contributed to the buyback, Elliott said.

The Melbourne-headquartered lender capitalised on higher revenues from its institutional payments platform which processes cross-border transactions, as it continued to shift its focus away from traditional mortgage sector.

The institutional business recorded a cash profit of A$1.52 billion for six months, 12% higher than the half-year ended September 2023. The retail business, meanwhile, posted a 9% sequential fall to A$794 million during the half.

"ANZ's institutional business continues to be an attractive investment underpin and differentiator (43% of total cash earnings), while the buyback, Suncorp bank integration and prospect of further capital return are further positives," UBS analysts wrote.

ANZ, whose A$4.9 billion ($3.24 billion) buyout of Suncorp banking business was approved by the Australian Competition Tribunal despite competition concerns, said preparations to integrate the unit were "well-advanced."

Australian banks have allowed margins to fall over the last year as they struggle to compete in an intense home loan market, resulting in the lender posting a first-half net interest margin of 1.56%, down 19 basis points.

It declared an interim dividend of 83 Australian cents apiece, up from 81 Australian cents per share a year earlier.

($1 = 1.5099 Australian dollars)

(Reporting by Roshan Thomas and Poonam Behura in Bengaluru; Editing by Tasim Zahid and Lincoln Feast.)