ANZ NZ annual profit falls 8% from last year's record high with costs up 5% and income up 3% as credit impairments rise

ANZ NZ annual profit falls 8% from last year's record high with costs up 5% and income up 3% as credit impairments rise

ANZ New Zealand has posted an 8% drop in annual profit after what its acting CEO describes as a challenging 12 months for the country's biggest bank reputationally.

ANZ NZ's net profit after tax for the September year fell $161 million, or 8%, to $1.825 billion from the record high $1.986 billion last year.

Operating income rose $134 million, or 3%, to $4.326 billion. Net interest income increased 2% and other operating income rose 8%. Operating expenses increased $82 million, or 5%, to $1.585 billion. ANZ NZ cited remediation and increased regulatory requirements for the increase in expenses including preparing for the Reserve Bank's new outsourcing requirements.

Acting CEO Antonia Watson told interest.co.nz that adopting the Reserve Bank's revised outsourcing policy as required by 2022 will cost ANZ A$350 million, with about NZ$50 million of that booked in the September year and the rest still to come. Remediation costs the bank has been hit by include "making customers whole" for things like its mortgage calculator problem.

The bank's credit impairment charge jumped $46 million, or 87%, to $99 million. The bottom line was also hit by hedging and the revaluation of insurance policies falling into the red after being in the black last year.

ANZ NZ says customer deposits increased 5% to $90 billion and gross lending rose 4% to $126 billion.

"It has been a transformative year for our industry. While reviews by the Financial Markets Authority and Reserve Bank concluded the widespread misconduct issues in Australia were not found in New Zealand they helped us take stock of where we are today, what we're doing well and what we could do better for our customers, and we're making changes," Watson says.

"Beyond those reviews we have faced our own challenges. Despite our tough year our people have continued to put our customers first every day...Despite the difficult year ANZ New Zealand has continued to perform well," says Watson.

She also notes the bank has experienced a "challenging 12 months reputationally." See more on this here. And Watson notes this was the first financial year without frontline incentives at ANZ NZ, saying staff "embraced the cultural change away from sales targets while still focusing on good customer outcomes."

UDC on the block again, can consider further capital management actions once outcome of APRA & RBNZ capital proposals are known

ANZ NZ says it is again exploring a range of strategic options, including divestment, for its finance company subsidiary UDC Finance. This comes with ANZ having called off efforts to sell UDC a year ago after a $660 million deal with Chinese conglomerate HNA was blocked by the Overseas Investment Office, which couldn't satisfy itself who actually owned HNA.

And ANZ NZ's Australian parent, the ANZ Banking Group, says it's engaging with both the Australian Prudential Regulation Authority and Reserve Bank of New Zealand on their respective proposals that could increase the amount of capital the group needs to hold to support ANZ NZ.

"The impact of these changes depends on a number of factors and the final outcome remains uncertain. This includes the outcome of consultation, particularly the amount of capital required, the time allowed to achieve it, and the instruments permitted to be used. Given ANZ is in a strong capital position with organic generation capacity, management will maintain its focus on capital efficiency. The Board can consider further capital management actions once any regulatory changes are known in the coming months," ANZ says.

The ANZ Group's annual cash profit was slightly lower at A$6.470 billion versus A$6.487 billion. Its annual dividend per share was unchanged at A$1.60, and its return on equity was down 10 basis points at 10.9%. In a blow to Australian shareholders, ANZ's A80c per share final dividend is only 70% franked per share rather than the typical 100%.

The ANZ Group put ANZ NZ's home loan marketshare at 30.7% at September 30, down from 30.9% a year earlier. It also says ANZ's NZ division net interest margin dropped to 2.33% from 2.42% year-on-year.

ANZ NZ's press release is here.

ANZ's group release is here and its investor presentation is here. 

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Thank you for making a profit. Thank you for the returns. Thank you for the kind treatment of your staff. Thank you for not being a National Bank any more, but a fair dinkum Aussie. Thank you for all those you "Saved"

Well credit where credit is due....

Extraordinary, absurd in fact, that some commentators are suggesting the new RBNZ ratios will have the Australian banks “abandoning” New Zealand. Little country that we are ain’t going to any institution that walks away when they can make $1.8B, in a bad year and doing it all largely just by being here.

Lock Hisco up

No, he was just full filling his obligations like most Bankers do. A mere bag-a-tell. Be thankful JK was not in his position and in his boots at the time, if that is politically correct. One can only point out that an Aussie position is in effect a licence to make money and if that takes wine women and song and pumping and dumping Houses, so be it. Parking lots and lots of cars may be a wasted space, but eventually that will break even and fetch a bundle, just like all land bankers wish and prey for.
I am just thankful a little was left in the pot, but may have to look elsewhere, now that a more senior flag waver is now seated at the table, smiling and waving, but somehow looking lost along with another wishful thinker. Capital ideas must be extended to keep the ball rolling for many a year to come, I hope and pray that our predilections are covered and that our interest is maintained in this direction, not Aussies as ye cannot believe a word, they and I say.
But credit where credit is due, you cannot trust any one with long term money, these days. So spread yer bets and keep praying, they do not prey on you. A link to explain your comment, may be useful, however. Some people have short term memories. I will say no more.
ttps://www.stuff.co.nz/business/113641865/the-fall-of-anz-chief-executive-david...

Anyone know what the status of the way below market value house sale is now? I.e. is IRD investigating this as tax-free income? I recall seeing FMA saying it should have been recorded as a related party transaction...

The IRD are a little busy at the moment on the warpath in Central Otago, they'll look into it once they've finished their Jet Boar tour of the Shotover River.

I think it's going to be one of those things in NZ that just disappear over time like a proper investigation into Todd and the Billshitter or a proper investigation into SAS in Afghanistan, Erebus, Wine Boxes et al.
It's just the way in Smalltown NZ with intwined relationships thru upbringing, schooling etc and a dying, irrevelant media.

Hmmmm...I wonder if the IRD would be okay with us all having part of our compensation packages done thus?

Shareholders should be leading this, the banks executives have a history of destroying value and then disappearing with a golden handshake. That won't stop without intervention.

Good lord, even in a bad year ANZ are printing $1.48b npat and ROE of 17.4%.

Add in NZ revenue captured in other divisions (institutional $240m for example) and you get to a very big number.

To put it in perspective, their Global Financial Markets business prints $469m with ROE of 6.8%

Maybe it's because ~60% of lending is to residential real estate that attracts a RWA commitment of ~27% of 8%? regulatory capital requirement and the fees on the KiwiSaver franchise will not be insignificant.

For sure, it's all about the risk weights. Capitalism needs house price growth...

LOL - little boxes on the hillside, little boxes made of ticky tacky economics. No?

FYI, risk weights are different for:
1) owner occupier residential real estate
2) non owner occupied residential real estate.

I have never seen the internal calculated risk weight models ANZ serves up to the RBNZ for approval.

Clarification - my comment was in reference to RBNZ standard risk weightings, not ANZ internal risk weights.

Isn't ANZ on the standard model after their whoopsie with 5 years of non-compliance? https://www.interest.co.nz/banking/99734/rbnz-revokes-anz-nzs-accreditat...

Noteworthy - "the bank's credit impairment charge jumped $46 million, or 87%, to $99 million."

Peanuts..

Still making huge money off the Kiwis. The Roo is getting fat. Would make for a tasty meat treat for an overseas take over ? How about ACC and Super Fund join together and do that ?

Deposits rose more than loans.
Does that indicate more caution by customers?