ANZ NZ reveals big mortgage customer switch to floating rate loans from fixed term loans

Australia's ANZ Group, owner of ANZ New Zealand, the National Bank, UDC Finance and OnePath, says New Zealand lending was flat in the three months to December as the economy "slowly" recovers.

ANZ, like rival ASB earlier this month, reported a big switch by mortgage customers to variable, or floating, home loans from fixed-term loans. ANZ says variable loans comprised 49% of its mortgage portfolio at the end of 2010, up from just 26% a year earlier.

"Pricing benefits from the roll-off of fixed rate loans and switching to variable rate loans continues to flow through, however the margin benefit from the that repricing has been largely offset by strong deposit competition," ANZ Group CEO Mike Smith said in the group's first quarter trading update.

Smith said moves by ANZ in New Zealand to one information technology (IT) platform would lead to a one-off charge of about A$120 million in the first-half of 2011 to fund the integration of IT systems and related costs, which "will be excluded from underlying profit."

The shift to a single IT platform, eight years after the ANZ Group bought the National Bank in 2003, along with the recently announced new management structure, aimed to "significantly" improve service levels and "business outcomes" over the medium term.

"Customer satisfaction in both the ANZ and the National Bank brands are trending upwards."

Smith said deposits in New Zealand grew 4.2% in New Zealand dollar terms during the quarter. Although the New Zealand economy had stabilised, the return to growth was slow.

Meanwhile, ANZ Group's unaudited underlying profit after tax for the three months to December rose 27% to A$1.4 billion.

Earlier in the month ASB's acting CEO Ian Park told interest.co.nz that ASB's fixed to floating mortgage split was now about 50-50 and had probably moved from about 75% fixed and 25% floating over the past 12-24 months.