Whopper June quarter for ANZ mortgage growth

Business

ANZ NZ records strongest quarterly home loan growth in 8 years and reduces provisions for credit impairment despite softening economy

18th Aug 15, 10:33am by Gareth Vaughan

ANZ New Zealand has posted a 5% rise in unaudited nine month profit as income grew slightly faster than expenses.

At the same time the country's biggest bank has recorded its strongest quarter of net residential mortgage volume growth in eight years, and reduced its provisioning for loan impairments.

ANZ says net profit after tax rose 5%, or $61 million, to $1.30 billion in the nine months to June 30 from $1.24 billion in the same period last year.

Net interest income rose $84 million, or 4%, to $2.140 billion. Total operating income was up 3% to $2.907 billion, and operating expenses rose 2% to $1.108 billion. Provisions for credit impairment rose to $58 million from a write-back of $20 million in the same period of the previous financial year.

ANZ said year-on-year customer deposits increased 7% and gross lending rose 5%. In the June quarter, however, term deposits fell $454 million, or 1.3%, to $34.4 billion, and gross loans rose $3.9 billion, or 3.6%, to $113.5 billion.

Mortgage growth surges; Provisions down

Meanwhile, ANZ recorded net quarterly mortgage growth of $1.779 billion in the June quarter. That's growth of 2.9% versus housing loan growth in the Reserve Bank's sector credit data of 1.9%. ANZ's home loan book stood at $63.7 billion at June 30.

The June quarter mortgage growth is ANZ's strongest since $1.8 billion in the June quarter of 2007. And it comes off the back of a strong March quarter, which saw ANZ post its highest quarterly net home loan growth in seven years, $1,275 billion, almost matching the $1.3 billion in the March quarter of 2008.

With dairy farmers under the cosh from falling payouts, you might expect ANZ - as the country's biggest rural lender with about $11.3 billion of dairy exposure - to be increasing its provisions for credit impairment. However, the bank's total provision for credit impairment (collective plus individual) was reduced $2 million in the three months to June 30 to $657 million, and it's down $57 million year-on-year.

Total impaired assets fell $62 million, or 12%, in the June quarter to $440 million. And loans at least 90 days past due but not impaired rose $4 million from March to June to $236 million. At $676 million impaired assets and loans at least 90 days past due, combined, are equivalent to 0.44% of ANZ's $154.135 billion in total assets.

ANZ paid $955 million of ordinary dividends in the nine months to June, equivalent to 76% of its $1.26 billion cash profit. In its last full financial year ANZ paid record annual net dividends of $1.366 billion.

Banking rego breach

ANZ Bank NZ's disclosure statement reveals the bank has been in breach of its conditions of banking registration.

"The Bank has identified that due to noncompliance with a documented internal process, the Bank was required to include the assets of the associated Bonus Bonds unit trust in the risk weighted exposures for the Banking Group for capital adequacy purposes. As a result, the Bank was technically in a position of noncompliance with Condition of Registration 1B for a period of time," ANZ says.

"These assets are included in the Banking Group’s risk weighted exposures as at 30 June 2015 and, as at that date, the Bank was in full compliance with its Conditions of Registration. The Banking Group's capital ratios were not materially affected, and no additional capital is required to be held as a result of including these assets in the Banking Group’s risk weighted exposures. The Bank proactively brought this matter to the attention of the RBNZ, who have acknowledged that the matter is not material, technical in nature, and that no further action is warranted on the part of the RBNZ."

All New Zealand's other major banks - ASB, BNZ, Westpac and Kiwibank - have also breached their conditions of banking registration during recent years.

Here's ANZ NZ's press release. The ANZ Group also issued a trading update with detail here and here.

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20 Comments

by murray86 | 18th Aug 15, 12:40pm 1439858428

How can $1.3 billion be considered a reasonable profit for nine months????! This is NZ only! If this is not proof that weare being ripped off by the banks what is? They are making $295 net profit from every man woman and child in this country! By what rationale is this reasonable?

by Your Landlord | 18th Aug 15, 1:53pm 1439862789

Gosh, ANZ announces huge growth in their mortgage business, yet we have so many of the moaning brigade here on interest.co.nz complaining that house prices are too high!

by murray86 | 18th Aug 15, 2:49pm 1439866176

That is because FHBs have created an upwards spiral, that is fed by local investors too, that means anyone wanting to buy a home has to take out a mortgage that will take the lucky ones 30 - 50 years to pay off, and many more never. If the property market crashes then the banks will end up the biggest landlords, and a lot of ordinary kiwis will lose their shirts. Moaning? No justified concerns, yes. Many of these countries these investors come from (not just China) have restrictions on foreigners owning property that our Government is afraid to reciprocate. I personally believe that NZ is already unaffordable for all but a few moneyed elite. I cannot see any of my children or grandchildren being able to afford a home here in NZ, and I believe that paying rent is a fools game, as any home is at the whim of an often greedy and unscrupulous landlord! There really is little choice left.

by xingmowang | 18th Aug 15, 2:55pm 1439866547

'... as any home is at the whim of an often greedy and unscrupulous landlord! ...'

That is a pretty strong statement, which many ppl will not agree.

by murray86 | 18th Aug 15, 3:23pm 1439868203

Do you consider the ability of the individual applying to rent the house to afford the rent you want? Do you size your rent at an affordable amount for the average income? Do you consider that a long term tennant may have a stronger connection to the home than your wallet? i doubt it, no land lord I ever met did those things. i did when I owned my properties. Landlords are in it to make money, and all sources are fair game, and there is very little morality or ethics in the picture when the rent requires 60% or more of the weekly take home wage, leaving very little if any thing left after costs or a way out of the rent trap. Greedy and unscrupulous is actually polite!

The ones who don't agree are probably looking in a mirror and don't like what they see. Perhaps the Government should put rent controls in that limt rents to no more than 20% of the take home wage?

by xingmowang | 18th Aug 15, 4:15pm 1439871356

You made me speechless.

Keep voting for Labour/Green and they will try very hard to picture an ideal world, in which all the wonderful things that you asked above would be granted.

by frazz | 18th Aug 15, 3:50pm 1439869821

Have to agree with Murry, once a landlord myself really only interested in the bank balance if I was honest. Yes Xingmowang your vote for National is certainly paying dividends for NZ?

by xingmowang | 18th Aug 15, 4:13pm 1439871216

FYI, I do not vote for National neither.

by xingmowang | 18th Aug 15, 4:26pm 1439871968

'... once a landlord myself really only interested in the bank balance...'

Doubt that you had ever been a landlord once. The #1 thing to a landlord is to keep good tenants renting for as long as possible.

by frazz | 18th Aug 15, 4:47pm 1439873268

Really X..., why would I lie to a great landlord like yourself. So who did you vote for as you brought up the subject? So its in my imagination the apartment I owned for 5 years, and sold to start a business that provided a great product and employees people? Oh well just keep counting your rent X and remember , houses prices can only go up.

by cowboy | 18th Aug 15, 3:49pm 1439869767

"Do you consider the ability of the individual applying to rent the house to afford the rent you want?"

Irrelevant.
Does the supermarket change its prices for the food I want?
Does the bank drop the o/d rates because I have little money? Or make it small because I have few assets as security?
Does my insurance rate change because I have little income?
Does my phone or power rate get adjusted because I'm on low income?
How about petrol/diesil prices, are they negotiable by income?
What if I rent a car or hirequip some gear?
I have yet to get a restaruant or fast food to drop the bill because I'm a low income person.
Same for dentists and doctors, because I don't have a vagina so therefore I pay full rate, no discount.

Income tax was flat - but it was decided to penalise those with more ability to pay.

Try harder to get your foolish assumptions about what rent "should be". It is a service - my house loan/price that I pay doesn't go up or down if I put a low income tenant in it.

I look in the mirror, like most landlords and very happy with the service I offer, and consider it too cheap considering what the margin and risk should be but I have sympathy for my tenants and their wage - too much so in fact.

However people like yourself need to put *your* earned (and not from taxpayer sourced money) where you mouth is. Those of us who walk the walk actually know what we are talking about, unlike yourself.

Yes, houses should be cheaper.
But the price of consents and tradespeople and rates and insurance and interest means that they will cost what they do, rent is about 0.1% - 0.2% per week of captial/market value. When things like insurance and rates go up by proportionally more, then the rents also climb above that ratio.
Those are the price setting factors.

You want it to change bring in rules to bring down the prices of new builds and the TCO !
You want it to go up, bring in rules requiring WOF, insulation, consent, RMA...

Last hotpoints I got put in cost about $500 per hotpoint.
Doing an official wiring check for insurance $450.
Rent coming in $210. Rates = $50, Insurance about $40. = $90 fix overhead.

Building value (2bd) = 160k, $210- 90 = 120. 120 - 30% tax = $84 with nothing aside for upgrades&consents&maint.

84 * 52 = 4368
4368 / 160,000 = 2.7% yield (Not counting insurance) remember no upgrade,consent, maint, risk.

And you have the BS to tell me that 2.7% on a good day is "greedy and unscrupulous".

It's not that you're being rude, is that you are so far, and _obviously_ _demonstrably_ WRONG, that how can -you- bear looking in the mirror....

(20% of _whose_ take home wage???? (Theo Speirlings gets millions, $210 is less than 20% of that) who pays the rest? what about the fixed costs?)

Do the NUMBERS.
And please stop commenting on stuff that you _clearly_ have not done even the most basic of homework.

by frazz | 18th Aug 15, 3:57pm 1439870260

Blah Blah cowboy ...Negative gearing.... oh you don't mention that ...hmmm

by cowboy | 18th Aug 15, 7:36pm 1439883366

whats wrong with negative gearing?

Just like _every_ business/income, including sole proprietors any losses from one income source is applied to the persons grouped income and so makes sure their tax liability relates to what they actually receive.

In fact, in the case of pass-through companies, the loss by the company can be proportioned out to the _shareholders_ and that portion is then grouped with the rest of that persons income sources having the same effect. Public/you/me don't lose anything in this as either the company/business can rollover the loss until next year, or they can proportion out that loss and not roll it over internally.

by DFTBA | 18th Aug 15, 4:09pm 1439870978

housing is not a luxury. it is a necessity.
As are food and electricity.
You will find there are many groups of people arguing that the price of power should go down (not privatise and run for profit), and who are investigating why the duopoly in NZ of supermarket chains seems to have inflated the price of necessary items.
.
Why is it so abhorrent to expect/ask people to have a moral compass?
.
Is the be all and end all to life really to get as rich as possible?

by cowboy | 18th Aug 15, 7:42pm 1439883734

market need is what drives trade.

what are you selling, and what are you selling into if not to needs (or wants).

yes it is abhorrent because your compass is skewed and not sustainable - just take the people asking for lower food prices AND demanding greener food production & logistics.
Or cheaper house but with more bells and whistles (like insulation, hotpoints etc).

The be all and end all certainly includes paying full price for what they demand. What is so morally wrong or abhorrent about meeting the price for what you demand from others? What net-profit should a house or food yield? Would you sell your labour for zero wage - how would you support yourself and your family and save for the time when you can't work? Why do you expect zero wage for landlords doing their job? why is a landlord supposed to be a slave to freeloaders - now that is abhorrent.

by cmat | 18th Aug 15, 5:41pm 1439876489

Are we supposed to feel sorry for you because you invested in a property that only yields 2.7%??!
Crack out the violins.

You can invest in a term deposit, near as risk-free, for more that that so clearly you've invested for capital gain if you KNOW the property only yields 2.7% (quite why you're only calculating yield on the building value is interesting though - what about the land you paid for?).

Fact is incomes mean you aren't capable of charging more.

Why not invest in something productive rather than playing in real estate? Such a mug's game.

by cowboy | 18th Aug 15, 8:31pm 1439886694

No cmat. You're supposed to actually employ your brain.
the person I replied to stated this as a fact: " Landlords are in it to make money, and all sources are fair game, and there is very little morality or ethics in the picture when the rent requires 60% or more of the weekly take home wage, leaving very little if any thing left after costs or a way out of the rent trap. Greedy and unscrupulous is actually polite!"

I gave an example of exactly what one of my typical properties basic transactions to prove the previous poster was absolutely incorrect and out of line with his accusations.

That is INCLUDING land price. Yes, I picked up two 2bd properties on cross-lease for total $310k+lawyers fees. They are cross-leased to each other so having the pair makes it a much better deal.

No I haven't invested for capital gain, as the capital gain in this area is -0.25% approx last year, and about -3% over the last 9 years. My previous purchase in that area in 2007 was 2bd with garage & aircon for $190.

*** So please cmat offer _your_ proof to why I have invested for capital gain. ***

Personally I don't see any capital gain in that area for another 8 years minimum and fully expect a total of 5% _loss_ for most of that time.

I did however buy the place outright, 100% equity, no mortgage.
If I had used a 20% deposit, only paying out $32,000 of the $160,000, then I would have had a yield (before interest of around 14.5%) does that sound a bit better? However....at that LVR I would be negative geared.

So I _could_ put it in savings or TD and get better gross yield by how could I leverage that in the future?
(and yes, my advisors have criticised and debated my decision to invest into res property re:yield)

However, I have skills and interests I can use to add value to a residential property. I (finally) have an excellent property manager (Julian at Property Brokers). I now have a bricks and mortar investment that is more stored value than gold, that if push comes to shove I can house family and friends. It's a real store of value so tracks itself with inflation, despite that I can borrow against it so it's not entirely illiquid, so opportunity cost only applies to the interest costs and core LVR. Can you do these things with a TD or gold? Also if my employer has a hard time or the market no longer wants my skills, it does not affect residental property, so as long term income source it ranks with blue chip. Yet not so volatile in it's value as a share portfolio, and pays weekly (than that twice a year if I'm lucky) and I have some say/freedom it how my property and investment is handled, unlike stocks).

And with my equity level (in my various properties) , I could go pick another property in town (up to 4bd, standard fare) and buy it with zero cash down, and still be well within LVR recommendations. Not possible that I know of with TD.

actually market says I could charge 10% more. I don't see the point. I'm within the happy band. 0.1-0.2% so I'd rather see their money going back into the economy. Yes I have some work I want to do to the places and that will lift the rent in a couple of years. I normally only increase to keep up with rates and insurance, to cover work/repairs done, and when new tenants come in.

But really...what's more productive?

I have gold and other metals. don't have budget for stones or art.
Have a few thousand in shares but the NZX is pretty thin and the sovereign funds make it a casino.
I've got about 20k riding in FX at the moment (yeah lost 50k in the second swiss bounce ) making about $50/day consistent.
Currently studying part-time for my IT degree (again).
Just got out of dairy farming.
Really can't be bothered with commercial or industrial property (although got friends in that).
Can't do trades etc because of the time involved having to be employed by a tradesman.

Looking a small businesses, but ... what skills, and in NZ what opportunities? Anything basic need is taken over by councils or schools/poly/uni that are funded from the public purse. Anything more advanced needs expensive certificates (and formal training programs) or is taken by big corporation.

Got a couple of IT projects I'm still plugging away at but that needs training.
Was considering setting up a local makerspace to bring hands-on development skunkshop/innovation to the area but I get the feeling such things tend to be new-age collectives that depend on either a few vocal wishful thinking media whores (like the now dying 3D printer mania), or funded to cost from socialist public funds who like playing puppet master to the former loud voices.

by DFTBA | 18th Aug 15, 3:52pm 1439869941

You think it is good practice to allow a mortgage to buy an overpriced house, liened against another overpriced house, which was probably secured against the unrealised equity of another overpriced house?
.
Huge growth in the business - IF all their assets get realised. Which is looking increasingly unlikely.
.
Really starting to see the case for MI reporting of Banks to be done out-house.....it's easy to massage the numbers in your favour when you need to.

by murray86 | 18th Aug 15, 4:32pm 1439872342

All the above comments define the capitalist attitude where a few get rich off the rest. No I am not a socialist or communist, but like those systems I am beginning to believe that the capitalist market economy that is currently popular is deeply flawed. I have worked for manufacturers who priced their product based on what they thought the market would bear, not what it cost to produce plus a reasonable margin. When I asked how much it cost to make, they actually did not know! This is driven by greed. We see huge profits in businesses, bosses getting paid significant amounts but a dog eat dog world when it comes to getting a decent wage, gradually reducing living standards, and spending power while 1% of the world controls 90% of the wealth. And our successive Governments have no answer, while they kowtow to the big money, look after their own remuneration packages from the public purse, and give away our sovereignty. It will take huge balls to make the changes necessary, and I suspect a fair amount of pain, but mostly for the ones who think they are entitled to wealth off the backs of others!

by marcf28 | 18th Aug 15, 5:53pm 1439877229

Can finally pay the ING money back , think 40 cents in the dollar still owing ( plus interest and late payment penalties )