NEW ZEALAND BUSINESS NEWS
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ANZ New Zealand, the country’s biggest bank by lending, has reported a 7% fall in annual profit, ending a run that peaked with a record result a year earlier. Net profit after tax for the September year came to $2.359 billion, down $173 million.
The bank mainly lends to households for mortgages, as well as to businesses and rural customers. Housing loans make up 74% of its total lending, up from 73% a year earlier, so the mortgage market sets the tone for its results.
Total operating income rose 3% to $5.302 billion. Within that, net interest income — the money the bank makes on the gap between what it pays depositors and charges borrowers — also rose 3%, to $4.586 billion.
Costs outpaced both. Operating expenses rose 9% to $1.982 billion, including a $125 million provision for a High Court class action brought under the Credit Contracts and Consumer Finance Act. ANZ New Zealand lost that case and is appealing; the bank puts its maximum potential exposure from the case at $125 million.
The gap between income and costs showed up in the cost-to-income ratio, which rose 310 basis points to 42.0% from 38.9%. In plain terms, the bank now spends 42 cents running the business for every dollar it brings in.
The net interest margin fell seven basis points to 2.52%, a level the bank still describes as high. ANZ New Zealand attributes the decline to competitive pressure in the lending market, as banks compete harder for borrowers.
Hedging also weighed on the result. Returns from the economic hedges the bank uses to manage interest rate and currency risk dropped to $53 million from $163 million.
On the lending side, the loan book grew 3% to $163.915 billion. Deposits and other borrowings rose 5% to $160.724 billion, meaning funding grew faster than lending.
Impairments turned as well. The bank booked $42 million in loan impairments for the year, up from a $25 million release a year earlier, when it wrote back provisions rather than adding them.
Housing lending rose $5.112 billion, or 4.4%, to $120.947 billion, according to the bank’s general disclosure statement. Reserve Bank figures show total housing lending grew 5.4% over the September year, so ANZ New Zealand’s share of the mortgage market slipped to 29.7% from 30.0%.
Asset quality deteriorated modestly. Individually impaired assets rose $39 million year-on-year to $408 million. Loans at least 90 days past due fell $13 million to $946 million, and the allowance for expected credit loss dropped $5 million to $797 million.
The bank’s total assets sit at $219.460 billion. It paid ordinary annual dividends of $1.610 billion, $40 million less than a year earlier.
Its general disclosure statement reports profit on a different basis from the headline figure, showing a $181 million, or 7%, decline to $2.533 billion.
About 47% of ANZ New Zealand’s home loan customers are at least six months ahead on repayments, and nearly half hold a savings buffer of at least $5,000. That cushion matters to any business selling to households, because it suggests many mortgage holders have room to absorb higher costs before they cut spending.
For businesses that borrow, a margin under pressure at the country’s largest lender is worth watching. Competition in the lending market pushed the margin down, and that same competition is most likely to shape what borrowers are offered.
Chief executive Ben Kelleher, who took over from Antonia Watson in October, describes the economy as strengthening but uneven. He points to hospitality as an industry under strain, while reporting broad resilience among business and rural customers.
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