ANZ NZ reports big rise in loan impairments against COVID-19 backdrop

Banking

ANZ NZ records credit impairment charge of $312 million for first nine months of current financial year, more than treble the sum recorded for its full financial year in 2019

19th Aug 20, 2:31pm by Gareth Vaughan

For the first nine months of its current financial year ANZ New Zealand, the country's biggest bank, has booked credit impairment charges more than three times as big as it booked in all of its previous financial year.

In a third quarter trading update issued on Wednesday ANZ NZ said it recorded a $79 million loan impairment charge in the June quarter. That adds to the $233 million reported for the six months to March 31. It takes the bank's credit impairment for the nine months to June 30 to $312 million. That's $211 million more than the $101 million reported for ANZ NZ's full September 2019 financial year.

Under accounting standard IFRS-9, or International Financial Reporting Standard 9, banks must take into account expectations of future losses and economic conditions, with the outlook deteriorating significantly since the COVID-19 pandemic began. ANZ NZ says its credit impairment provisions rose $65 million, or 8%, to $838 million at June 30 from $773 million at March 31.

Between 23 March and 31 July, in response to the COVID-19 pandemic, ANZ NZ says it provided financial support to more than 39,000 personal, home and business loan customers through:

loan deferrals, adjustments and restructures impacting approximately $27 billion of its lending portfolio. This included deferring repayments on home and personal loans for more than 15,000 customers impacting approximately $5.6 billion of ANZ NZ’s lending portfolio, equivalent to about 6% of the bank's home loan portfolio;
granting more than 2,600 temporary overdraft facilities to businesses needing more working capital, worth around $46 million.

The $27 billion figure is equivalent to about 20% of ANZ NZ's gross lending of $136 billion, which is little changed since March, the bank says. Westpac NZ provided figures for COVID-19 related customer support, also as of July 31, on Tuesday. And ASB reported its June year financial results, including loan deferral details, last week.

The mortgage deferral scheme, put in place at the onset of the COVID crisis in March by banks, the Reserve Bank and the Government, was this week extended by six months to March 31 next year.

Meanwhile, ANZ NZ says its unaudited net profit after tax for the June quarter came in at $351 million. It didn't provide a comparison with the June quarter of last year. However, the Reserve Bank's Bank Financial Strength Dashboard shows a profit of $504 million in the June quarter last year.

ANZ NZ says customer deposits increased 2.1% to $115.8 billion between March and June. The bank also says it provided new loans of about $7.4 billion during the June quarter, comprising $4.3 billion of consumer lending and $3.1 billion of business lending. The bank's total capital ratio, as a percentage of risk weighted exposures, rose to 14.0%, from 13.9% at March 31. The Reserve Bank mandated minimum is 10.5%.

ANZ NZ says KiwiSaver funds under management rose 11% between March and June to $15.5 billion.

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28 Comments

by J.C. | 19th Aug 20, 2:41pm 1597804863

Little more than a smoke signal. The real extent of impariment is not available to the masses.

by Good Samaritian | 20th Aug 20, 8:13am 1597868033

By now, it should be plain to see who's in charge of the situation; and its not the governments, but rather the banks.

This is a byproduct of poor governance from past politicians, who have taken to easy path by deferring unpopular decisions in their own interests of re election. If the country have deficits to the world (which they have had for 2/3 decades or more), you either fix it by increasing income or reducing expenditure. Selling assets is a short term fix, and allowing overseas interest to control essential products and services is not the answer either (unless you regulate prices).

There's a simple solution to this, and its restricting mp's to a maximum six years of tenure. It would clean out the career politicians, who have created this mess and encourage better long term decision making; which would attract better quality people to represent us.

by Hook | 20th Aug 20, 9:22am 1597872133

I'm not sure restricting tenure would help. I think we'd just get a constant continuation of what we have now.. inexperience and incompetence. Sales of assets brought in FDI which NZ needs as the capital pool in NZ is too shallow. Pretty much all the big manufacturing sites now offshore owned were sold by private owners not the Govt.

by Good Samaritian | 20th Aug 20, 9:54am 1597874048

I take your point about inexperience, however a short tenure would possibly encourage better qualified people to put their name in the hat. One of the main problems with the present system is its designed to discourage better qualified people from running. There's be a range of better qualified people who have only lasted a single term, because the people above them are more interested in their continued tenure than what is good for the country.

FDI is only good if it creates more jobs locally and used to benefit the wider interests of NZ; rather than maximising short term profit. Selling our banks off delivered nothing of that, and now we are captured by overseas interest which call the tune. We should have maintained a kiwi share in strategic assets, and ensured the rules on these shares can only change by public referendum; rather than politicians that cant be trusted.

The reserve bank is effectively funding these overseas banks now, while they continue to make obscene profits when everyone else is making a loss. Thought overseas banks were suppose to retain profits locally, but it seems the reserve banks have changed their mind on this without communicating to the public.

by Good Samaritian | 20th Aug 20, 9:54am 1597874049

by VeryInterested | 19th Aug 20, 2:50pm 1597805440

So, is this a joke then - NZ’s biggest bank providing $46m in support of 2,600 businesses at an average of $17,500 when the govt. provided a massive guarantee scheme to Banks to support business lending - absolute Disgraceful - they clearly should no longer call themselves a business bank ...

by J.C. | 19th Aug 20, 2:58pm 1597805898

They never were a 'business bank' (well maybe a long time ago). They're primarily an overblown mortgage house.

by realterms | 19th Aug 20, 3:19pm 1597807158

Is "overblown mortgage house" not a suitable description of all NZ banks?

by Audaxes | 19th Aug 20, 3:22pm 1597807349

Building society

by Antz | 19th Aug 20, 4:59pm 1597813140

Great link, Audaxes, thanks.
Accords with my experience of trying to get business loans over the last decade or so.
Any business loan offered secured against assets & cashflow of business was only agreed to after the whole of 80% of home equity was borrowed first. And business loan was at a much higher interest rate, of course, and had to be paid back in 5 years, whereas home loan portion was over 30 years.

by Glitzy | 19th Aug 20, 7:20pm 1597821613

A while ago when I approached ANZ to lend against a portfolio of NZ govt bonds (which at the time they held in custody) I was told that they didn't do lending against bonds, only property.

I pointed out that the bonds were held by ANZ and could be liquidated within minutes of a default and had a AAA rating and that in other countries you could borrow at a very low rate against liquid, high grade collateral.

ANZ replied that they only lent against property !

by waymad | 19th Aug 20, 2:58pm 1597805910

Or just maybe - they took a good look at the books of applicants, and threw the Drafting Gate into the Reject lane.....being compelled to take on hopeless cases is a job for Welfare and City Missions - not banks.....

by VeryInterested | 19th Aug 20, 3:17pm 1597807055

But they are more comfortable lending to mortgage holders who may have no/or limited ability to repay their mortgage in the future. Banks heavily favour personal customers with a mortgage rather than the businesses that pay the salary of the people on deferrals.

by Hook | 19th Aug 20, 6:28pm 1597818517

Probably because they can foreclose on a personal mortgage and still have an asset. When a business goes into liquidation there's little to nothing left after the IRD takes it's pound of flesh. Banks are a business - not a charity. BTW I hear anecdotally that banks are getting very picky with mortgage lending atm.. really drilling down into peoples outgoings and employment history, future prospects and the industry they work in.

by J.C. | 19th Aug 20, 4:13pm 1597810399

The ANZ brand taking a bit of a pasting here

by nigelh | 19th Aug 20, 5:24pm 1597814652

Would suggest it's not much more different than any of the other majors. Don't have any facts or figures though.

by Rosenstein | 19th Aug 20, 4:14pm 1597810470

Fat of the Land. A Prodigy album and a bank's bread and butter.

by CourtJester | 19th Aug 20, 4:34pm 1597811675

Millennials being the Jilted Generation

by Hook | 19th Aug 20, 6:24pm 1597818261

What makes them special? Every generation has had their challenges. Gen X, Y and Z are struggling too. Life's a struggle.. accept it, suck it up and find a solution, same as it's always been

by Lanthanide | 19th Aug 20, 7:56pm 1597823781

Firstly, millennial are 'gen Y'. Secondly they and gen Zers are struggling more comparatively than boomers or gen Xers did at the same age.

by Dave2 | 19th Aug 20, 10:31pm 1597833082

And you know this how? The late 80s early 90s we’re considerably more difficult.

by GV 27 | 20th Aug 20, 8:46am 1597869968

And how are you measuring this? What sort of data is this based on?

by Hook | 20th Aug 20, 9:26am 1597872412

Probably the same source as mine.. personal experience.

by GV 27 | 20th Aug 20, 9:56am 1597874178

So which bit of anecdata overrides documented spiraling housing affordability ratios, plummeting home ownership rates, and people leaving it longer and longer to have children and having fewer of them? Because that kind of stuff suggests it's actually not as easy for millennials and zoomers out there as it is was for their fore-bearers.

by Hook | 19th Aug 20, 6:56pm 1597820212

Seems Mr Orr was right after all with his demand to have banks increase their "impaired loan" provision. This is just the beginning.. let's see how much blood's on the floor in 12 months time - I reckon it's gonna look like a slaughter house with lots of walking wounded and even more defaults/impairment provisions required

by waymad | 19th Aug 20, 9:31pm 1597829470

Perhaps we'd better sluice down the blood gutters, in preparation... can't have too much Spillover, no Resource Consent for That....

by Glitzy | 19th Aug 20, 7:09pm 1597820978

1. "loan deferrals, adjustments and restructures impacting approximately $27 billion of its lending portfolio"

2. ANZ NZ records credit impairment charge of $312 million for first nine months of current financial year

So 27bn of loans which have had a workoutin some way shape or form and only $312mm in impairments. That's a little over 1%. Seems a tad on the light side !

by jackmarrow | 13th Aug 21, 2:15pm 1628820944

Reckless actions always have consequences, not maybe immediately but later on. I think these stuff were already on the way since before, and the effect came just now.
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