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ANZ NZ's annual profit pushes above $1.9 billion helped by strong housing lending and lower loan provisions; 70% of total lending now housing lending

Banking / news
ANZ NZ's annual profit pushes above $1.9 billion helped by strong housing lending and lower loan provisions; 70% of total lending now housing lending

ANZ New Zealand says annual profit jumped 44% as the country's biggest bank rose a surge in housing lending and reduced provisions for bad loans.

The bank's September year net profit after tax jumped $583 million to $1.919 billion from $1.336 billion last year. That's not too far shy of ANZ NZ's record annual profit, which was $1.986 billion in the September 2018 year.

CEO Antonia Watson says the rise was driven by record demand in the housing market, a stronger than expected economy, and a significant drop in the loan provisions ANZ NZ put aside last year.

Housing lending reaches 70% of total lending

The bank grew home lending by $9.3 billion, or 10%, to $99 billion over its September year. According to figures from Aussie parent the ANZ Banking Group, housing lending reached 70% of ANZ NZ's total lending at September 30. That's up from 67% a year earlier, and 63% in 2019.

“High house prices continue to be driven by historically low interest rates and more demand for houses than are available. This demand is reflected in our financial results,” Watson says.

“During the year we believed housing affordability was becoming unsustainable so implemented a number of initiatives to try and bring some balance to the market."

"It’s in everyone’s long-term interests that the heat be taken out of the housing market. That’s why we were first to adopt higher LVR [loan-to-value ratio] restrictions for investors, reduced the minimum size of apartments we will lend on, introduced a discounted interest rate for new builds and helped fund and facilitate $600 million in social housing construction,” Watson says.

Lending market share falls

Over the September year ANZ NZ's share of system-wide housing lending rose from 30.5% at September 2020, to 30.6% at March 2021, before dropping to 30.4% at September this year. At the same time the bank's share of business lending fell to 22.5% at September 2021 from 23.5% a year earlier. Its share of agricultural lending dropped to 26.2% from 27.2%.

Meanwhile, the bank experienced a $516 million annual turnaround in loan impairments to a release of $115 million from a charge of $401 million.

“The ability of many New Zealand businesses to learn from last year’s lockdowns and adapt, and continuing strong global demand for our exports, has meant we were able to release $115 million of the credit impairment provisions we’d made previously into this year’s result,” Watson says.

ANZ NZ grew customer deposits by 3.5% and gross lending by 6%. KiwiSaver funds under management rose 16% to $19 billion.

The bank paid ANZ Banking Group a dividend of $845 million in June.

Operating income up 2%, operating expenses down 7%

ANZ NZ's annual net interest income rose $175 million, or 5%, to $3.404 billion. Total operating income was up just $83 million, or 2%, after a drop in other operating income to $4.132 billion.

Operating expenses fell $129 million, or 7%, to $1.607 billion with the drop attributed to reduced customer remediation and restructuring measures, the sale of UDC Finance last year, one-off costs last year not being repeated and efficiencies.

ANZ NZ's 2020 annual results included a $32 million loss on the sale of UDC Finance after the $794 million sale to Japan's Shinsei Bank, plus a $23 million after tax loss stemming from unwinding the economic hedges from UDC loans. Meanwhile, ANZ NZ's 2019 annual profit was $1.825 billion, $94 million lower than this year.

The ANZ Banking Group said the annual net interest margin at its NZ unit rose seven basis points to 2.33%, and its cost to income ratio fell 510 basis points to 39.7% Gross impaired assets as a percentage of gross loans and advances dropped to 0.13% from 0.30%. And ANZ NZ increased full-time equivalent staff by 381 to 7060 during the September year.

ANZ NZ says over the counter transactions at its branches are now down 50% since March 2020.

ANZ NZ's press release is here.
The ANZ Group release is here.

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50 Comments

Hallelujah...

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5

Hell yeah!! The transition to neo-feudalism is accelerating - hooray!

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8

We arrived here a few years back I think

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5

NZers are bidding hard, working hard, and fighting hard for making AUS a gaint profit.

 

lol

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15

Pay raise for everyone, share the love. Discount rate for staff.

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1

Finance Capitalism versus Industrial Capitalism: The Rentier Resurgence and Takeover

What promised to be a democratic and ultimately socialist dynamic has relapsed back toward feudalism and debt peonage, with the financial class today playing the role that the landlord class did in postmedieval times.

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14

Is this an expected result? FY20 was very poor (Covid) and I don't think these new results are an improvement on FY19.

Thoughts?

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0

It's great to see such a productive NZ owned business flourishing. 

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10

~30% drop in Bad and Doubtful Loan Provisioning?

"40 per cent of Kiwis have less than $1000 in savings" Hmmm......

https://tinyurl.com/5c5hxxn3

 

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4

(Payments under all of government Covid-support schemes has now topped $17 billion.) - Link

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That 40% mostly won't be home owners, if they are home owners  it's likely they have been smashing every spare dollar into the mortgage so have some way to go before they run into trouble on that front. 

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Great now they can increase the 0.3% serious saver interest rate..........

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9

Isn't it a ridiculous name "SERIOUS SAVER" 0.3% interest! Especially when inflation is 4.9%

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19

And don't forget the tax on that!

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7

It's a serious rate for the shareholders!

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4

Serious Saver is actually .2% do you mean increase to .3%? Don’t forget you only get this when you meet the strict conditions of the account.

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2

The big winner of us all being conned into paying more and more via cheaper lending (she'll be right mentality) is no surprise...the foreign controlled Banks. All just in time for globally driven interest rate rises...

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12

Straight forward, unbridled wealth extraction. How do banks still retain a social licence?

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21

Straight forward, unbridled wealth extraction. How do banks still retain a social licence?

It's a relevant but unanswered question. Creating massive profit from nothing except the privilege to promote and create gigantic debt obligations for no productive output.  

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12

And people wonder where all the money come from to pay those eye watering, mouth dropping house prices.

At least the Ausi banks will have have debt slaves to feed of over their life time.

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9

Breaking: Company with permission to print money and lend at interest makes huge profit.

In other news, the Sky is blue.

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10

I bought in 10 widgets, I sold 150 widgets - its an actual miracle. They should change their name to the Second Coming / Loaves and Fishes , and other Jesus based paraphenalia.

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3

Tbf at least Jesus had the sense to kick them out of church. Shame some of  his followers let them back big time.

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4

The breadth of this incoming asset bubble massacre is incredible. Lots of rosary bead clutching and looking at the heavens from debt swamped asset owners when the RBNZ has no choice but the pull the trigger on the inflation bazooka. 

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10

The RBNZ will do the bare minimum they can get away with.  Probably even less.  Just enough for some limp wristed optics.  They only pay lip service to stable prices and protecting the value of the dollar.

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2

We have people living in cars and Government funded motels while banks cream it from a Government/Reserve Bank backed housing ponzi.

Said banks have a unique licence to conjure up deposits and then lend them to the hapless serfs (mortgage holders) while offloading risk via deposit.

Not forgetting mortgage payments/rents are being subsidised via Government accomodation supplement.

Just to add a bit of icing on the cake the spoils of this charade are being repatriated to the bank's Australian parents.

You can't make this s*** up - we are being well and truly fleeced.

 

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20

Well put. These obscene profits are the direct result of a range of Govt policy decisions, which have created the perfect feeding ground for these leeches.   

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9

Are bank shares a buy at present , C35 data  shows that aggregate interest fell to another new record   low , notwithstanding rising mortgage rates over the past quarter and the overall increase in lending. 2,323 million in interest payments against 320 billion in lending , will certainly be the low point at this time, as borrowers lock in longer  terms at higher rates, until the RBNZ inevitably reverses course. The banks of course will benefit in the interim .  

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0

Genuine question... Do Aus / NZ banks really make their money from the differential between borrowing and lending rates any more? Surely their profits are made primarily from buying and selling financial assets - leveraging their position as a primary dealer in the bond market and exploiting their mortgage retail network (aka creating financial assets for sale)?

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1

Banking is a strange beast. It's one of the core reasons why the mammoth bubble exists: the ability to lend into existence; be regulated by very little; and get the full backing of the govt apparatus. This is essentially a money fountain with an imaginary reservoir to draw from. Its resources are largely a fiction except for debt obligations that it has the right to create. The ruling elite and the sheeple cannot see a problem with this banking system even as it is essentially out of control and destroys the currency and value of labor. Parent company's stock price up 45% over past 12 months. No surprise really. But I have a feeling this is not going to end well.  

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7

It only ever not ends well for the poors.

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3

The return on average assets for the Oz banks is pretty low - way under 1%. These are for the oz parents but paint the picture:.

https://finbox.com/ASX:ANZ/explorer/roa/

Part of the reason bank profit's seem huge is because of consolidation in the banking industry.

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Disagree. The stock price has performed as it has because it's the only game in town. 

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Well, the article is about the profit, not the share price, so my comment was an attempt to put that profit in context.

For example, this Forbes article:  https://finbox.com/ASX:ANZ/explorer/roa/

...says "An ROA of 5% or better is typically considered a good ratio while 20% or better is considered great.".   

But of course it varies by industry (depends on things like whether it an asset heavy industry), and low ROA seems the norm in the banking sectors of developed countries at the moment.

I wonder if a headline like "ANZ returns 0.5% on assets" would have generated the same range of reactions?

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Well, the article is about the profit, not the share price, so my comment was an attempt to put that profit in context.

OK, you can look at profits and / or stock price (market value). My point still stands: it's the only game in town. ROA stands out from ROE (Return on Effort). No other industry has the privilege to do what banks do. 

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Agreed - seems like a license to print money.

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2

And return on current equity?

Return on equity original equity?

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1

How can Sharon Zollner keep a straight face when she talks in such concerned tones about the cost of housing???

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7

What she's doing is explaining the problem away from where she sits. Antonia Watson employs the same tactic in the media release. The govt and the central bank do similar. Someone else's problem. Nothing to do with me. 

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8

She, and other vested interests, seem to be feigning concern getting ahead of the curve.

When the whole house of cards tumbles down at least they can point to being "concerned".

Also note how banks are asking for ever larger deposits. This is in the name of "risk management" but in reality means the mortgage holder takes all the risk of the first 30 - 40% fall in house prices while the bank holds none.

 

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Also note how banks are asking for ever larger deposits. This is in the name of "risk management" but in reality means the mortgage holder takes all the risk of the first 30 - 40% fall in house prices while the bank holds none.

Society also implicitly takes on the risk. People don't understand this. As a corporate entity, their risk is limited. 

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5

Agreed - and that makes the setup even more egregious

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3

As long as it isn't a local bank.

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They will close more branches. Welcome to the matrix!

only citizens, that upon digital inspection, will be able to buy a home if they commit to the worlds largest and longest loan.... just don’t get caught using too much Uber eats or lying on the docs and you are in

what a wonderful future our children have!

I hope they have a royal commission into  the whole affair one day

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2

gnx,

'I hope they have a royal commission into  the whole affair one day'. Great idea, so long as its chaired by a retired Reserve Bank governor!

 

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Contrary to the Australian headline today!

ANZ’s stunning home loan fail complicates succession plan....Shayne Elliott’s decision to take full responsibility for ANZ Banking Group’s stunning failure to capture its fair share of the home lending boom complicates the search for his replacement.

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Interesting. Mr Burns passed along. 

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Let's keep buying same house from each other 10 times and make the bank rich.

I would say to anyone young and first home buyer. Run for your life from here. World is big and lots of better opportunities out there. Don't waste your life taking a huge mortgage and getting stuck here. It's not worth it. 

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5

Looks like more dividends are on the way.

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0

Isn't this the bank that is making the biggest margin on loans. They are first to increase their rates before RBNZ.. Their margins and fees needs to be investigated. 

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