Almost three quarters of ANZ New Zealand's total lending is now housing lending and CEO Antonia Watson says this is likely to rise even higher.
Speaking to interest.co.nz after ANZ NZ posted interim financial results on Thursday, Watson said housing lending as a percentage of the bank's total lending will likely keep rising, at least "at the margins."
ANZ NZ's home loan book now stands at just over $113 billion, with total gross lending just under $154 billion. At 74% of total lending, housing lending as a percentage of total lending is up from 63% of total lending in 2019.
"As a country we need to improve and expand our housing stock. And that housing stock needs to be funded. Whereas we're probably not going to significantly increase our stock of, for example, farms. So you wouldn't expect your agri lending to increase to the extent of your housing lending."
"So there's always going to be a reason that something that we really need to grow as a country is going to grow as a portion of our bank lending," Watson said.
"I think the difference is business [lending]. As we see the economy get a bit more confidence as some of these green shoots pass through and some of the uncertainty goes away, hopefully you'll at least see the business lending side of things increase a bit."
"But at the moment what we're seeing is a lot of uncertainty...The extra cash in hand people have as a result of declining interest rates, we're not seeing consumers spend that, and we're not really seeing businesses invest that. We're seeing people sort of shore up their buffers rather than feel comfortable yet to spend that money," said Watson.
She doesn't believe banks are necessarily incentivised by regulatory capital requirements to lend on housing more than agriculture or business lending.
"We're incentivised to lend to anyone who can pay us back at the right price," Watson said.
"For a good quality farming loan we charge about as much as we do for a housing loan. When times are tough and your business is looking more difficult and therefore we have to hold more capital against it, that's when you get the pricing pressure come on."
Of the three other big banks, housing comprises 70% of ASB's total lending, 67% of Westpac NZ's and 57% of BNZ's.
Matos 'thinks we've got a good business here'
The ANZ Group, meanwhile, get a new CEO on Monday when Nuno Matos succeeds Shayne Elliott. Watson says she has met Matos twice online and once in person, with him set to visit NZ for the first time later in the month.
"He is really impressed with our business in New Zealand because he understands that banking is a scale game. You need the scale to be able to invest in the technology and the regulatory compliance and all that sort of thing. And so he thinks that we've got a good business here, is my initial impression," Watson said.
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11 Comments
back to 0.25%?
Ok guys I have a plan, at the moment our eggs are all over the place, some in corporate lending, some in residential, agri, some in SME.
If we put all the eggs in one basket we can reduce operational costs....
Very neutral article. Does the proportion of lending against a single asset class - housing - raise concern? How does this stack up against other economies?
So many different factors involved in all of these stats that are particular to each countries economy and demographics. NZ's Mortgage Debt-to-Income Ratio is way out of line at 114% (column 3 below). That is a combination of low wages and over valued assets.
Country | Homeownership Rate | Mortgage Debt-to-Income Ratio | Notable Characteristics
Germany | ~47% | ~53% | Strong rental market, conservative lending
Japan | ~61% | ~36% | High down payments, deflationary pressures
Italy | ~80% | ~22% | Low mortgage reliance, cultural inheritance
NZ | ~65% | ~114% | High mortgage debt, housing-focused lending
Australia | ~70% | ~74% | Significant housing investment, rising prices
From ChatGPT - the above could be a hallucination.
It smells like we are world leaders at selling expensive houses to each other.
With all that credit being spent its no wonder we had a rock star economy, now just a old rocker living on memories.
Given home-owners are the reliable voters, it makes sense that the banks would lean further into home lending as it is effectively underwritten by the government.
This is what NZ wants - a country's fortunes revolving around residential property. Hope we're all happy.
Hands up who wants to take on a big business loan in this climate.
Or who'd even be able to get approved.
Easy if you have enough equity in property, it will be added to your mortgage... as the capital the bank has to put against that is way way less then if its written as a business loan.
That's more risk on residential ultimately though. ANZ has diversification with loans to SME's but X% of their SME loans are secured by the owners house?
And the banks wanna lower their capital requirements?
I guess they can also assume that govt will dive in and socialise the losses
If we have a serious house price meltdown, all the banks will be impacted at once
What impact would a war over Taiwan have?
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