ANZ boss sees ‘stress’ in the economy as bank profits slide 7 per cent

ANZ has agreed to pay a $25 million fine for failing to pay benefits to half a million customers.

ANZ boss Shayne Elliott said the bank’s credit quality remains robust despite rising cost-of-living pressures in the Australian economy as he posted a 7 per cent fall in half-yearly cash profit and announced a $2 billion buyback to boost its shares.

“There are very real stresses in the economy,” Elliott said. “Interest rates have risen a lot relatively quickly, people are paying more tax because of bracket creep and of course things like rents, and food and groceries, have been increasing a pretty rapid rate.”

However, Elliott said the bank was well-positioned to help customers who did find themselves struggling to service their loans, with the number of people in financial stress remaining “remarkably low”.

He made his comments as ANZ on Tuesday morning announced a cash profit of $3.55 billion for the six months to March, missing the $3.63 billion average analyst forecast in a Bloomberg survey, and declared an interim dividend of 83 cents a share, 65 per cent franked. The bank also announced a $2 billion buyback, which it said reflected its strong capital position after selling a large part of its Malaysian AmBank holdings.

ANZ’s net interest margin – a measure of profitability comparing the bank’s funding costs with what it charges for loans – fell 2 basis points to 1.63 per cent. It comes as mortgage competition remains a headwind for the local banking sector, with Elliott saying Australian and New Zealand retail banking was “more competitive than ever.”

ANZ’s Australian retail bank saw a 9 per cent drop in cash profit to $794 million even as it gained market share in home loans. However, it maintained that its mortgage pricing remained above the cost of capital.

The bank’s flagship digital offering grew to nearly 690,000 customers and $14 billion in deposits at the end of April, with customer deposits more broadly growing 5 per cent over the latest half.

ANZ’s Australian commercial business grew its loan book by 4 per cent and deposits by 3 per cent, but recorded a 5 per cent fall in cash profit to $665 million. The bank’s institutional business grew cash profit by 12 per cent to $1.5 billion, largely driven by a 27 per cent increase in markets income.

ANZ’s New Zealand operations grew cash profit by 2 per cent to $852 million, but saw 90 day-arrears on loans jump 18 per cent across the half.

Elliott said he expected both the domestic and international environments to remain challenging over the year.

“The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally,” he said.

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