ANZ New Zealand, the country's biggest bank, posted a 4% rise in interim profit after a significant drop in credit impairment charges.
ANZ NZ's net profit after tax for the six months to March 31 rose $36 million, or 4%, to $1.038 billion from $1.002 billion in the same period of its previous financial year.
The bank's half-year credit impairment charge fell $88 million to $33 million from $121 million. However, it increased total credit impairment provisions, what's put aside for potential bad debts, by $13 million to $870 million.
"Given the more challenging environment we are in, we do need to remain cautious. The number of customers falling behind on their repayments is rising," ANZ NZ CEO Antonia Watson says.
Parent the ANZ Banking Group says its NZ unit's loans at least 90 days past due rose 18% across the half-year.
"For the six months to March 2024, ANZ has reached out to over 200,000 homeowners to offer extra support and 8,500 customers have completed a home loan check in," ANZ NZ says.
Watson says only about 17% of ANZ NZ's home loan customers are still on interest rates below 5%.
The bank says it provided $10.1 billion worth of new home lending, increasing its share of the housing lending market to 30.5% from 30.1% year-on-year. As of March 31, ANZ NZ's total home loans stood at $109 billion, up $4 billion over the six months from September 30 last year.
Operating income rose $34 million, or 1%, to $2.524 billion, with net interest income up $15 million, or 1%, to $2.142 billion. Operating expenses rose $50 million, or 6%, to $859 million with Watson saying this was "broadly flat" inclusive of higher wage and operational costs. ANZ NZ's cost to income ratio rose to 38% from 35.6%.
ANZ NZ also says its interim fair value losses from economic hedges used to manage interest rate and foreign exchange risk came in at $117 million, a $12 million increase.
Buffers 'being used up'
Speaking to interest.co.nz Watson said borrowers are getting used to the new normal to the extent they're able to.
"But that said, I think that the thing on the horizon that we have to look at particularly is the unemployment rate. It's always as unemployment increases, that's when you also tend to see a lot of hardship when you're not having that regular income coming in. So that's another thing that we're keeping an eye out on," says Watson.
"Last year I was saying that about a third or more of our [home loan] book was more than six months ahead on their repayments. That's come down to just less than 30%. So there's still some good buffers in there, but they're definitely being used up is what we're seeing."
The latest Statistics NZ figures show unemployment rose to 4.3% in the March quarter, or by 31,000 people to 134,000, from 4% in the December quarter.
ANZ NZ is currently testing mortgage applicants at 8.95% to check their ability to maintain payments if interest rates rise further.
ANZ NZ's net interest margin way ahead of ANZ Group's
Figures released by ANZ NZ's Australian parent show the half-year net interest margin - the difference between what the bank borrows money at through the likes of deposits and what it lends it out at - for its NZ unit at 2.56%, down from 2.67% in the same period of the previous year.
The net interest margin drop was attributed to asset margin contraction from home loan pricing competition, and savers shifting to term deposits offering the bank a lower margin. However, the NZ unit's net interest margin was well ahead of the ANZ Group's, which dropped nine basis points to 1.56% in the March half-year versus the September half-year last year.
The ANZ Group put ANZ NZ's net lending at $133 billion as of March 31, up $2 billion over the half-year, and its customer deposits at $109 billion, up $3 billion. The NZ unit's gross impaired assets came in at $130 million, up 21% year-on-year but down 1% half-on-half.
The ANZ Group says ANZ NZ has 82 cents in deposits for every $1 in loans.
Return on equity from its NZ unit was 16%, the ANZ Group says. ANZ NZ contributed 17% of group revenue.
Meanwhile, the ANZ Group posted a 1% drop in March-half cash profit, versus the September-half, to A$3.552 billion. Its return on equity fell 42 basis points to 10.1%, and its dividend rose A2 cents per share to A83c.
The ANZ Group also announced an A$2 billion on-market share-buyback.
The chart below, on loans at least 90 days past due, comes from the ANZ Group.
The table below also comes from the ANZ Group.
21 Comments
"Operating income rose $34 million, or 1%, to $2.524 billion, with net interest income up $15 million, or 1%, to $2.142 billion. Operating expenses rose $50 million, or 6%, to $859 million."
"ANZ New Zealand, the country's biggest bank, posted a 4% rise in interim profit after a significant drop in credit impairment charges."
expenses is increasing faster than income, but profit is 4% up, faster than income. so the profits is from savings on impairment. I have a feeling that their next results will not be as rosy as this one.
The next six months are going to be very interesting.
If the Recession deepens, and unemployment spirals quickly, we'll have little visibility given the statistical reporting cycle is so delayed.
I guess the powers that be will spin the line, "Who could have seen that coming?" (The NACTF will blame the past government and look just as inept as they do now.)
Like I've said, November 2020 was the time the RBNZ should have begun their easing cycle. Too late now.
Anecdote: I was told by a mortgage broker that ANZ would give just about anyone a mortgage during the RBNZ created property boom. ANZ's final result could be interesting indeed.
They have painted themselves into a corner. Dropped the OCR too low and printed too much during the pandemic, raised too late... and now RBNZ has not many options to they want to balance the directions of the economy, currency and inflation. Every move delivers an unwanted outcome for something and house prices will likely be just one of the asset types that have to find their own level as they fight to keep the economy level or growing.
This was all predictable - increased mortgage interst/payments-inflation reduces disposable incomes - unemployment increases, bonus disappear etc result mortagege arrears then defaults - car loan defaults and credit card missed payments already here. RBNZ are about to discover that its not different in NZ.
The Banks went for it. Easy loan conditions increased Credit card limits. then as the economy deteriorated they have been panicking. Will they bare the losses. I don't think so. Banks also don't any bricks and mortar. Very few actual Branches.
The ANZ Group says ANZ NZ has 82 cents in deposits for every $1 in loans.
Not sure what this really means. Can someone explain? We know that the ANZ does not lend out deposits, but for every loan created, a corresponding deposit is created.
but for every loan created, a corresponding deposit is created.
but those deposit may not be with ANZ.
I think the 82C vs $1 is just a the ratio of deposit taken vs loans lend.
I think the 82C vs $1 is just a the ratio of deposit taken vs loans lend.
Assume that all loans have 20% deposit and loans (deposits) 80% is created out of thin air.
That would mean that for every $1 lent, there is $1 equivalent of deposits, even though 80% of those deposits never existed before the keystroke.
It would have to.
So what's a better way to illustrate where and what $0.18 is?
The manner in which ANZ describes is that they want to people to think that they are on the whole financial intermediaries. I think this is deceptive and does not represent the reality.
Can someone else explain this? I’m interested to. Presumably when a bank writes a loan for a mortgage and the funds are credited to the vendor’s account with another bank then the way it is resolved is by the purchaser’s bank having to settle with a transfer to the other bank with its RBNz settlement account at the end of the day ?
It means they only have 82 cents to cover every dollar of loans. They are illiquid if called upon
Default rising. How long will the Banks extend and pretend supporting default continue. If prices continue to spiral down, whats is the tipping point for banks to start gassing the speculative...?
If everyone tried to withdraw their deposits today, would would their haircuts be?
Withdraw to what? Cash? No where near enough cash for that. RBNZ wouldn't step in and create $700b worth of notes. Then who would accept cash?
What you're on to is the CBDC direct deposits with RBNZ - where the ~$100b sitting in 0 interest transaction accounts on the banks balance sheets would disappear and reappear on the RBNZ balance sheet. THAT would/will be interesting for the cost of money.
No, just transfer to other banks. Most people have more than one bank.
Who want's to put a guess on this one? I'll have a wild stab at around November after the number of housing stock increases come July and it becomes painfully obvious to the banks that they need to get something back before the proverbial on the fan blows back at them.
November 2022 or later in November 2023?
Watson says only about 17% of ANZ NZ's home loan customers are still on interest rates below 5%
Proud to be in that group :-)
The ANZ Group says ANZ NZ has 82 cents in deposits for every $1 in loans.
A good metric to be aware of. It puts the amount of "loans created out of this air" into perspective. I believe, in accounting terms, it theoretically makes ANZ insolvent, unless they have other assets.
Do you know if this is just mortgage loans they are talking about or all loans?
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