New Zealand's biggest bank records increased annual profit as income rises while expenses and loan impairments fall

New Zealand's biggest bank records increased annual profit as income rises while expenses and loan impairments fall

ANZ Bank New Zealand has posted a 15% rise in annual net profit after tax as income rose while expenses and loan impairments fell.

New Zealand's biggest bank recorded a $238 million rise in September year profit to $1.780 billion from $1.542 billion the previous year. That's a fresh record high for annual profit, topping the $1.771 billion ANZ NZ recorded in the September 2015 financial year.

Operating income rose 7% to $4.077 billion, and net interest income increased 2% to $3.078 billion. Operating expenses fell 8% to $1.446 billion, and loan impairments dropped 60% to $59 million.

Parent the ANZ Group attributed the drop in NZ expenses to a reduction in full-time staff driven by automation and transactions migrating to lower cost sales channels. Full-time staff numbers dropped 110, or 2%, during the year. Reduced loan impairments were attributed to an increase in write-backs and improvements in credit quality in ANZ NZ's retail, commercial and rural loan portfolios.

ANZ NZ enjoyed a $204 million, or 26%, jump in "other" operating income to $999 million, which the bank attributes to higher markets trading income and valuation gains on derivatives. Annual profit from the bank's institutional business surged $163 million, or 82%, to $362 million.

Expenses below 2010 levels

CEO David Hisco says ANZ NZ's strong year was mostly due to lending growth and continuing strong "cost management." Deposits grew 6% and gross lending increased 4%. Hisco says his bank was also helped by a lower than usual provision for bad debt charge, reflecting growth in some parts of the economy. 

“We have reduced the number of products from almost 350 in 2012 to offer fewer than 90 in 2017, improving staff efficiency and making life simpler for them and our customers,” Hisco says.

“Our expenses decreased 8% in full-year 2017 and are below our 2010 levels, while we’ve maintained high customer satisfaction. That’s a remarkable achievement and reflects our team’s strong discipline, high productivity and our digital push."

“The strength in some parts of the economy also meant fewer bad loans to contend with and a more benign credit environment saw the provision charge trend lower,” Hisco says.

ANZ NZ's September 2010 year operating expenses came in at $1.527 billion, just as Hisco succeeded Jenny Fagg as CEO. As of September 2010, ANZ NZ had 9,412 staff, 3205, or 34%, more than the 6,207 it had at September 30 this year.

Net interest margin stabilises

Figures released by the ANZ Group for its NZ division show a September year net interest margin of 2.31%, down six basis points year-on-year. However, for the second half-year versus the first-half, the net interest margin rose one basis point to 2.31%. ANZ NZ's annual return on average assets increased three basis points to 1.22%, and its operating expense to operating income ratio dropped 200 basis points to 37.6%.

ANZ Group figures also show ANZ NZ's net loans and advances increased 4% year-on-year to $117.242 billion, and customer deposits grew 7% to $81.855 billion.

Over its first year of offering customers Apple Pay, ANZ NZ says almost half its eligible customers have set it up. Eligible customers are those with an ANZ Visa debit or credit card and an Apple Pay compatible iPhone.

'Working with HNA' on UDC sale

On the proposed $660 million sale of UDC Finance to Chinese conglomerate HNA Group which was announced in January, ANZ says it's working with HNA towards completion of the sale, which requires Overseas Investment Office and Reserve Bank approval.

In Australia the ANZ Group announced an 18% increase in annual cash profit to A$6.94 billion. Its return on equity increased 159 basis points to 11.9%, and its net interest margin fell eight basis points to 1.99%. The ANZ Group's paying a fully franked final dividend of A80 cents per share, equivalent to 68% of cash profit. Dividends for the year are A$1.60 per share. There are NZ imputation credits of A10c per share.

Group CEO Shayne Elliot says the revenue growth environment will continue to be constrained in 2018 as a result of intense competition and the impact of regulation including a full-year impact of the Australian Government's bank tax. Elliott says the ANZ Group's cost base was down year-on-year in absolute terms for the first time in 18 years.

Here's the ANZ NZ press release, the ANZ Group press release, detailed results announcement, and investor pack.

Here's an interview Elliott did with ANZ's BlueNotes website, and one with chief financial officer Michelle Jablko

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34 Comments

I thought lending margins were tight and the banking environment "challenging" Lol

Parent company having issues

.....about one WEEK'S worth of profitability. That's' the kind of issue that I could put up with!

"mostly due to lending growth" You're joking! You mean 'growing the balance sheet's Receivables' is the reason for enhanced profitability? Who'd have guessed.....

The wonders of accrual accounting? Have the payment risks been factored in?

Those that sell first, sell best.

The New Zealand Prime Minister that took the country back into Marxism, has fired its first shot across the bow. The Labour party have formally signed a coalition agreement, introducing all new policies focusing on climate change, regional development, and poverty which translates into hunting the hated rich. Thirty-seven-year-old Jacinda Ardern, a member of the New Zealand Labour Party, became the world’s youngest female leader. Hillary must be crying in her martini.

Nevertheless, PM Ardern has just fired the first shot across the bow and this is a serious warning that foreign investment better cross New Zealand off the list of places that will be up-and-coming. She has banned foreigners from buying property in New Zealand. The first proposal was to ban any migration to New Zealand as well. That they had to back off of given the refugee impression and that would have agreed with Trump – OMG!

She thinks banned foreign property ownership will cool off the property market. The problem will be, a property crash. When home values decline, people feel they lost money and they spend less. With rising property values, people feel they are better-off and spend more assu8ming they have equity even if they do not borrow against it. Read more

Propaganda from vested interests.

That article is joke and a waste of time. She is not hunting the rich, she is making small tax adjustments that will slightly flatten the wealth curve. Shes not banning overseas investment either, what total hysteria. If she bans overseas investors from buying NZ property specifically so what, do any of us want a country of serfs?
Shes hoping to cool migration from 72K to cirrca 45K, which is still high but may plausibly be manageable eventually. Its just a set of pretty well considered adjustments.

That article is joke and a waste of time.

But it points to a financial instability issue that needs to be addressed or dismissed without reservation - notably:

When home values decline, people feel they lost money and they spend less. With rising property values, people feel they are better-off and spend more assu8ming they have equity even if they do not borrow against it.

The ponzi scheme:

THE Australian mortgage market has “ballooned” due to banks issuing new loans against unrealised capital gains of existing investment properties, creating a $1.7 trillion “house of cards”, a new report warns.

The report, “The Big Rort”, by LF Economics founder Lindsay David, argues Australian banks’ use of “combined loan to value ratio” — less common in other countries — makes it easy for investors to accumulate “multiple properties in a relatively short period of time despite high house prices relative to income”.

“The use of unrealised capital gain (equity) of one property to secure financing to purchase another property in Australia is extreme,” the report says.

“This approach allows lenders to report the cross-collateral security of one property which is then used as collateral against the total loan size to purchase another property. This approach substitutes as a cash deposit.

“This has exacerbated risks in the housing market as little to no cash deposits are used.” Read more

Liar loans:

To see why culture matters, consider a recent survey conducted by UBS AG. It quizzed Australians who'd applied for mortgages over the past 12 months and found that only two-thirds said their applications were "completely factual and accurate". Fully A$500 billion ($400 billion) of the country's A$1.69 trillion in mortgages outstanding are "liar loans" based on little or no documentation, the bank estimated. Read more

I like the article that's trying to blame the new Government for the massive housing bubble that National have been pumping hard. I guess there are just a lot of vested interests that want the party to carry on until it explodes by itself. It's foolish to keep such a corrupt and dishonest system going when it's going to do a lot of long term harm to our economy.

Financial instability because house prices cool off? Shes not trying to crash the market, she wants to put the brakes on and hopefully hold it roughly steady. Stable but periodically gently rising for a decade would be about perfect. A modest decline isnt going to do much to NZ, a mild and brief recession at worst.

latest i saw was about 10% over three years, so that is just over 3% decliner per year, that not a crash but a deflation back to a level

Banks, petroleum companies, food wholesalers, building material suppliers, insurance companies, travel service providers, of them all, it is almost impossible to name one that is not fleecing ppl living in NZ.

Hang on. What the hell is ComCom doing and what the hell is our democratically elected government doing?

Nothing, the righteous right of corporations to fleece citizens is underwritten in government department neoliberal ideology. Read more

With my Tinfoil hat firmly secured, I always secretly wonder if NZ is a test to see just how far you can push a populace before they revolt.

From what I see, we just bend further over the barrel and ask for more.

At Noncents. From a dairy owners/workers perspective, the revolution has already started.

Record profits , not surprising, considering the 170 billion in mortgage interest that we have collectively given over the past 15 years.

Can't Kiwibank compete with the Aussie banks at an Enterprise level? Or is it only good for retail banking of individuals and SMEs? Could the Government use Kiwibank? Why do people stay with the Aussie banks? What's so special about them?

My experience with Kiwibank has been largely poor service.

Funny but having been with National and ASB, Kiwibank actually have been better...

I believe service really come down to the individual that you see. No matter which bank you go to, there will be people that you believe provide great service and others within that same bank that you would avoid due to the poor service they would have provided to you.

a) Its said kiwibank is too small to do so at the moment.

b) I believe the plan of NZF is to move Govn banking to kiwibank.

c) That is a very good Q. As a friend of mine says about ISPs "just another telco" ie they are all pretty average, thieving b****** who think they are something special as they hold your Internet connection so try and screw you every which way they can.

c) Try switching to Voyager.

Surely a 95% corporation tax rate is on the way for these filthy capitalists?!

Could NZ apply deposit insurance just for Kiwibank?

Probably not as it would be viewed as anti-competitive behavior

Theoretically yes they could. In the US it is insurance paid for by the depositors being covered. There is no free lunch so all things being equal a depositor would be paid less interest for an insured deposit.

He means specifically only to KB to give them a competitive boost.

I took it in that way as well. Deposit insurance is just that, insurance. You pay a premium and you get a pay out. The big question is whether a single bank could do that and remain competitive? I suspect not. There's also the question of moral hazard for the regulator to monitor.

A single bank could do it. The cost is something like 0.2% On a 2% spread, between deposits and lending, the resulting 1.8% is profitable. The issue is if no other bank is doing, why would you?

If they need to raise capital, and believe offering insured deposits will generate the consumer interest required, I'm sure they'd do it.

I was thinking more in terms of a government guarantee, an amendment to OBR.

who was John Key going to be chairman for again?????

The ANZ will need extra profit margins to cover their recent ticket for being naughty boys in Australia, they have recently paid a fine amounting to 50 million, for manipulating the money markets shame on them.

This just goes to show how monstrous the Australasian banking industry has become when a mistake this big goes unnoticed:

https://www.stuff.co.nz/business/world/98286485/oh-my-gosh-its-25-mil-au...