CEO Antonia Watson says ANZ NZ doesn't currently need the RBNZ's proposed funding for lending programme, but she'd like to see more fiscal stimulus from the Government

CEO Antonia Watson says ANZ NZ doesn't currently need the RBNZ's proposed funding for lending programme, but she'd like to see more fiscal stimulus from the Government

By Gareth Vaughan

ANZ New Zealand CEO Antonia Watson says the country's biggest bank doesn't currently need the proposed funding for lending programme from the Reserve Bank, but is keen to see more fiscal stimulus from the new Labour government.

Speaking to interest.co.nz after ANZ NZ posted a 27% fall in September year profit to $1.336 billion on Thursday, Watson also said ANZ NZ was "ready and willing to implement" restrictions on high loan-to-value ratio (LVR) lending should the Reserve Bank decide to reimpose the macro-prudential tool.

Watson said ANZ NZ was on track for a record home lending month in October. The bank's previous record month, during the 2015-16 period, saw it do more than $600 million of net new lending.

The Real Estate Institute of New Zealand's figures last month showed the strongest September sales volumes in 14 years, and a record high national median price of $685,000. The Reserve Bank removed high LVR restrictions in April in the early days of the COVID-19 crisis. Governor Adrian Orr last week warned the Reserve Bank is "looking at" potentially reinstating limits on high LVR bank mortgage lending.

Asked if she was surprised to see how hot things are in the housing market Watson said she was.

"[But] I guess if you look through it it's less surprising. We're probably on track to have a record home lending month in October...That's definitely a surprise if you look back, if you'd sat in our shoes six months ago you'd never have imagined that," Watson said.

"When you think through low interest rates, you're probably not going to put your money on term deposit, equity markets are at all time highs, there's probably a bit of confidence out there about how long interest rates will remain low."

"Absolutely it [LVR restrictions] is a tool they've got in the toolbox. And it'd be something that if they look at the data and decide that's the right thing, we're ready and willing to implement again," Watson said.

She said ANZ NZ's appetite to lend at LVRs of more than 80% hasn't changed since the Reserve Bank removed the restrictions.

"There's enough uncertainty out there that we think people are better off having a good deposit with them. So whilst we write some of our book between 80% and 90%, we keep a limit on that. We have increased residential investment lending, we've got an appetite up to 80% LVR to that [this was restricted to 70% under the LVR limits]. So we have increased that appetite for residential investment lending, but we're still requiring at least a 20% deposit," Watson said.

"What we're seeing manifest at the moment in what we write, we're seeing probably 20% of our new lending in first home buyers, which I think is very positive, [and] just under 30% of it to residential investment lending."

Funding for lending programme not needed at the moment

Meanwhile, the Reserve Bank is looking at implementing a funding for lending programme, offering low-cost, secured, long-term funding for banks. Through this the Reserve Bank would provide wholesale funding to retail banks that it expects to be passed on to banks' borrowing customers through lower interest rates. More detail on this is expected in the November 11 Monetary Policy Statement.

Asked whether ANZ NZ actually needs this support at the moment Watson said: "No, we have plenty of liquidity at the moment, but we'd work on how we could use it."

This abundance of liquidity stems from the Reserve Bank's Large Scale Asset Purchase Programme, or quantitative easing, through which it's buying billions of dollars worth of government and local government bonds on the secondary market with new money in order to reduce borrowing interest rates.

"It takes time for us to be able to draw down the funding for lending programme [because] we need to wait for other funding sources to roll off. Or else we're just taking it and putting it back on deposit at the Reserve Bank," Watson said.

ANZ NZ chief financial officer Stewart Taylor noted that if banks know they've got access to the funding for lending programme, they may "reduce deposit pricing faster as a consequence." Watson said this could mean banks reduce lending rates, which is what the Reserve Bank is looking for.

That spells more bad news for savers, already facing interest rates at unprecedented lows.

Taylor said ANZ NZ, helped by quantitative easing, has seen "enormous growth" in its deposit book this year.  Overall deposit growth is just over $11 billion, he said, with $16 billion flowing into call accounts and $5 billion out of term deposits, dropping ANZ NZ's term deposit holdings to about $50 billion. Why?

"Rationally people are looking at it and saying 'the relative benefit of locking my money away for some term is smaller, and I'm probably thinking a little bit more about what I want to do with that money. And so I'd quite like access to it right now please'," said Taylor.

'We've got a new government and they appear willing to provide fiscal stimulus. And we'd love to see some of that'

Asked whether, if it goes ahead with the funding for lending programme the Reserve Bank ought to target it specifically at non-housing lending, Taylor said the problem with that could be a lack of willingness among businesses to borrow, as was being seen by the Business Finance Guarantee Scheme, which the Government broadened in August after slow take-up.

According to New Zealand Bankers' Association data, just 834 customers had received a total of $176 million through the Business Finance Guarantee Scheme as of August 31. And Reserve Bank sector credit data shows business lending down $5.725 billion between April and August to $117.697 billion. That's a drop of 5%.

Taylor said there's a lack of willingness from businesses to borrow given an uncertain economic outlook. Watson noted Thursday's ANZ Business Outlook Survey shows confidence back at pre-COVID levels.

"[That] is interesting and positive so we'll watch this space," Watson said.

So what support for the economy would ANZ NZ most like to see right now? Fiscal stimulus from the Government.

"We've got a new government and they appear willing to provide fiscal stimulus. And we'd love to see some of that used as long as it's very targeted at people and businesses who need it," Watson said.

"The specifics I'd like to see is to make sure it's very targeted to lower income earners. We know that will improve their wellbeing, and also they're more inclined to spend it, [and] to businesses that are struggling."

Prior to the election, Finance Minister Grant Robertson noted Labour's fiscal plan left $12.1 billion of the $50 billion so-called COVID-19 Response and Recovery Fund "protected," which could be used, if needed, to combat the health and economic impacts of COVID-19.

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50 Comments

17
up

"if you'd sat in our shoes six months ago you'd never have imagined that,"
There's the problem, right there, in one sentence.
Thinking outside of the box - not required.
There are probably a dozen commentators on this blog alone who could fill the shoes of CEO ANZ because they told you what was going to happen - and it has.

".. we have plenty of liquidity at the moment.." Cool. I know the answer! Lower the cost of additional liquidity you don't need. (shakes head in despair)

21
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(PS: "But you too saw the property market correcting at that time! Hypocrite!" I did. And that was BEFORE all this mucking about with the variables to 'rescue' that market - which as we all know IS the New Zealand economy.
That should not have happened and the market could have been allowed to adjust to a new level; one that is crucial to our future, and here's the good bit, the 'adjustment' would have been blamed on the Covid outbreak, not the RBNZ/Banks or Government. They wasted a prime opportunity to enact change, blame free.
There's another chance coming up - and if they have any sense, they'll use it wisely this time)

ANZ New Zealand CEO Antonia Watson says the country's biggest bank doesn't currently need the proposed funding for lending programme from the Reserve Bank, but is keen to see more fiscal stimulus from the new Labour government.

More government debt to stimulate an inflationary consumption fueled economic recovery. Banks get the security of increasing levels of floating rate government debt, via QE, on their books, to ride out the storm. Taxpayers get to fund the bill.

Does taxation fund anything? The Levy Economics Institute of Bard College says that they don't and nor does borrowing. http://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-go...

13
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Orr needs to pull the finger out, you know things are bad when the poachers are asking the game keeper for regulation....

There is nothing preventing the ANZ from implementing their own LVR's. This institution is only ever going to do or say what is in it's own best interests.

There is nothing preventing the ANZ from implementing their own LVR's. This institution is only ever going to do or say what is in it's own best interests.

There are no other businesses that have the same level of institutional privilege in the Anglosphere as retail banks (you inadvertently refer to a bank as an institution--a good indicator of how the public perceives them). It's very easy to work in your own 'best interests' when much of the responsibility of your actions can be absolved.

Problem is, they work in a highly competitive environment. They don't want other banks taking their future delinquent loans, which will result in taxpayer bailout. If the GFC told us anything it was: Those who got in the most s#%t by acting irresponsibly got the most funds from the tax payer bailout.

When governments think moral hazard doesn't exist, banks will rush to be the worst they can be. Particularly if it's been shown time and again that there are zero consequences (and often big bonuses if you hang in there) for banking execs.

This is it, if one does it then they lose business. It needs to be regulated. Banks will eat themselves into trouble. Assuming they're not there already. They have done scary debt too deposit ratios... I would argue they already have a liquidity problem...

Which is fair, they are in for the business, so already reported an increase record loan, with minor profit corrections. This is the best time ever for every Kiwis to register their loan interest with banks, quick due diligence, tidy up own finances, then get the loan as best/much as you can then applied to whichever land area with the loan value approval - The signal of assurances, are everywhere; business confidence, Covid quashed, lowest OCR/negative soon, more stimulus to come, no LVR, no CGT, everything are clearly on the way up for NZ economy. Plenty of other OECD countries right now is envy and looking at NZ quick, bold moves to secure it's economic stability in such short uncertain times.

Orr has been a complete disaster. Wrong at every step....

12
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If they are so willing to re-implement the LVR restrictions they could do it from today without the intervention of the RBNZ an reject all applicants on those basis right away, it would seem they are just playing a blame game on each other.

22
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Ban all lending by banks to investors for existing residential property... 30% for first home buyers... do your job Adrian Orr..

That would upset the ponzi scheme that is the core of our economy. We need a continuous flow of funny money via house price inflation (and FHB / lambs to the slaughter).

The goal here is for all parties is to appear to be "taking action", while being completely ineffectual.

This would be the sensible thing to do, would just add extending the ban on property investment altogether until the affordability comes back to pre bubble levels.

I would much prefer FHB (and investors) saves or have a deposit of 25% and if they cant save 25% they cant buy a property.
There is way too much emotion around FHB like they are some special group.
All the complainers in the FHBs are the I want it now group. Who need to learn to be fiscally conservative. If you want a house so badly get a second job at night and on Weekends. Stop spending on credit for all the latest iphone, car, clothes, handbags, dinners out and 8k TV.
If investors have the deposit why shouldn't the bank lend to them.

Don't let the facts get in the way of your story, OC! Millennials have higher savings rates than either boomers or gen x did at the same ages. As for 'I want it now' - this generation has basically had to delay everything that previous generations managed to do in their 20s (buy a house, start a family, etc). The story that the reason younger people are buying houses later is that they are more profligate and aren't prepared to buy smaller, less desirable places, and aren't prepared to work hard and save is just that - a story. There is no evidence to back it up.

I think your reply is rubbish. Regardless of what age they are save harder if they want a house. You and I have no idea if these people save more or less than before. I do know they have been saving less than I did at there age. But they need to work harder. I see weekend jobs on the window at my new world so they to grab one and save the extra.
This view that FHBs are a special group is just all emotion.
I know someone with 23 rental houses and he provides accomodation to families who can't afford a house. Why should the bank not continue to lend him.
I am young too. We need the lvrs to stop all buyers without enough equity.

And I think your reply is rubbish. You and I do have an idea about whether people save more or less than before, as there is data on that issue: https://www.treasury.govt.nz/publications/research-and-commentary/rangit...

Do you have data on whether 'they' (whoever they are) save less than you did at some unspecified age? I think it is pretty unlikely.

..

Also treasury report says this so must be the case.

Ok, so treasury data doesn't show anything, but your assumptions about whether 'they' are saving as much as you did based solely on the fact you own stuff and you've seen posters up at New World is reliable evidence?

Please stop repeating the lie that younger people are having trouble buying houses because they 'buy iPhones and handbags.' The idea that profligacy is the problem is false, demonstrably so, and you simply asserting it doesn't make it true.

Of course it is. They need to stop spending and save hard for 10 years or even 15 years if that is what it takes.
Less moaning and more work and savings.
When they are young they can work 70 hours a week. It's good for people to do this for as long as one can keep it up.

The new world was a suggestion to work nights and weekends at. But most are too good to be seen doing this and it cuts off social time at cafes and bars spending instead of saving.
Smarter ones will be able to do better than new world for a side job but if you can't then you have to start somewhere.

Lots of women dont want babbies in their 20s as you suggest its being delayed due to house prices. Total rubbish. More and more are top professio als and dont wants children until later or if at all. Its happening in many countries.

Only when the government as the currency issuer runs budget deficits are net financial assets created to finance private savings. We cannot save up bank created money as the assets and liabilities created in the private sector cancel each other out. Conversely budget surpluses destroy private savings, taxing more money from us than is being created through government spending into the economy. See 'sectoral balances' for an explanation here. https://gimms.org.uk/fact-sheets/sectoral-balances/

90% of fhbs now are not buying the latest iPhone etc....

They do blow money. Stop spending on credit for all the latest iphone, car, clothes, handbags, dinners out and 8k TV as i said above.
A friend who owns car dealerships has shown me how many buy cars at high interest rates. After 3 years they have paid the car off but its worth 40% of purchase price. Then the come back and trade up for another dose.

How do you know these ones blowing the money don't already own a house?

With the cars as they are running credit checks to loan them the money and completing the paper work. Numbers are high.
Also when you say own a house do you mean freehold as that what owning a house means to me or do you mean the bank owns it and you are the tenant?

12
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Can someone explain something to me please? One of a banks main jobs is to assess risk and creditworthiness. Correct? Part of that assessment is their own exposure to high risk (high LVR) lending. Correct? If the banks are worried about a housing bubble and high LVR lending why are they bleating for RBNZ to impose regulations on them? When in the history of banking have private banks wanted more regulations? Why are the banks not reducing high risk lending themselves? Why are they asking RBNZ to do it?

I'm not suggesting that RBNZ shouldn't do it but why are they banks bleating about the lack of LVR restrictions but yet at the same time, merrily lending out on high LVR?

It's called.....The Annual Bonus Pool.
If it's 'forced' on the banks, then it's not their fault that.. ( insert whatever happens afterwards, here)

11
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I would imagine if one bank reduces it's high risk lending then unless all others do they will lose market share. Makes sense to continue for the sake of profit.

They have assessed the risk and THERE IS NO RISK. That's the point, the government and central bank will not allow house prices to fall.

They'll implement mortgage holidays, reduce interest rates, provide additional lending, restrict supply, allow Kiwisaver withdrawal, provide extra deposits for FHB - WHATEVER it takes to keep this thing inflated.

From the banks perspective, keep lending. There's no downside.

The mistake you are making is judging these organisations by what they say. Judge them by their actions and it all makes perfect sense.

Banks do ration the level of lending against asset collateral via a haircut. Why would they want to be first inline to write down their capital in the event an an enforced asset write down?

the banks now pay their staff for sales so by bringing in rules to make the job harder will lead them to ask to be compensated next pay round, if the RBNZ bring it in they can blame them and effectively cut the wages of their staff
https://www.nzherald.co.nz/business/customers-being-sold-loans-they-cant...

That article is from July 2018 and a lot has changed. Driven by changes following the enquiry in Australia.
ANZ pay nothing for product or loan sales now.

GN - because they are self-serving, profit driven institutions incapable of even the most fleeting moment of altruism. Like expecting an alcoholic to just not buy the next drink - they need intervention to be saved from themselves.

I think by removing the LVR restrictions (and not reapplying them) the RBNZ is almost forcing the banks to gamble irresponsibly, much in the same way as their policies are encouraging individuals to also gamble irresponsibly through purchase of (more) property in a high risk environment.

Not much differ than Alcohol? Tobacco?, some section benefited through tax/govt, longer hours/more profit, some said we need to curb, others said we're adult that know how to be responsible, we're not to be govern in nanny state. Shifting the blame, delaying tactics..hell, we're even read recently that RBNZ worrying about climate change cost? ..what next Natural disasters cost prep? part 2 of legalise C/Sativa? vaping? - Some commenting on this interest.co.nz that Banks already prudent, are they? or are they not? - confuse, delay, clouded.. take advantage! - After all Kiwis in OZ driven the IQ up over there.. he heh.

Banks want to look like the good guys!
When they get their bail out it wasn’t their fault they tried pleading with the reserve bank.

But the banks try to lead us to believe that delaying the new bank capital requirements is a good idea. Surely the reason for the increase is for more protection at times exactly like these?

This indicate current market situation.

House in Otara with CV of 580000 sold in August 2020 for 641000 and now after a month again in market for 7890000.

https://www.trademe.co.nz/property/residential-property-for-sale/auction...

https://www.propertyvalue.co.nz/auckland/manukau-city/otara-2023/14-sand...

This is real business get 22% profit in 2 months - make 1500000 in two months.

Everyone should be in to one business only and that is house speculations specially now when government and RBNZ is all out to cover your risk.

Do you know how much they spend on the renovations over these 2 months?

Earlier listing - 2 months old. Seems bought and is being sold

https://www.barfoot.co.nz/property/residential/manukau-city/otara/house/...

Everyone should go in for this business as supported and promoted by RBNZ and Government instead of doing any other business in NZ as is is literally 100% return in two or three months as would have bought with 20% deposit - approx 130000 of 641000.

Government is sending signal to everyone that only risk free business is housing speculation - risk free as come what may govt and RBNZ will not let this ponzi stop.

We had our chance to do something to change it.

Everybody decided that voting for spineless mummy Jacinda was the safe option.

Now one can only vote with their feet.

The great New Zealand housing catastrophie will implode under the weight of its own absurdities within the next decade or so.

Avoid being collateral damage when it happens.

I am not for Jacinda but national would not have stopped the house prices going up either.
Any drop will be temporary and provided you are not forced to sell you should be ok and that's why I say buyers should have a minimum of 25% deposit whether FBH or Investor or moving house. If you don't have it save harder.

Who would want to live in otara? Pretty much a slum in the developing world...

Fully agreed with her, immediate actions by RBNZ for large scale FLP, more larger QE stimulus and the quickest negative OCR of significant digits, are the only way to save NZ right now - This is exactly, what we have to do in ICU most of the times to keep the patient alive - failing certain organs, we must do a quick machine intervention, drugs combo and leveraging threshold all parameters to keep it alive, put into sleep if necessary. Time is at the essence, quick, bold, large no hesitation for decisive amount of stimulus to be given. Be Firm!

Disagree. We need to let the market be the market and clean up the housing market. There will be road kill but they have been reckless.
Socializing losses is a disgrace.
if they want to create spending send stimulus cheques to all that way the bottom end of society get something and its not all about saving the debt fueled.