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ANZ watching mortgage book ‘like a hawk’

ANZ watching mortgage book ‘like a hawk’

The major bank has delivered an impressive 18 per cent profit but warns that the ability of highly indebted Australian households to withstand shocks has “diminished” over the last 12 months.

ANZ this week announced a cash profit of $6.94 billion for the year to 30 September, up by 18 per cent on the previous year. The group managed to lift capital, return on equity (ROE) and cash earnings per share (EPS), as well as reduce costs, over the period. 

“Two years ago, it was clear we needed to reshape ANZ’s future,” ANZ chief executive Shayne Elliott said. “Although we had a strong business, the external environment was changing faster than we were, and our customers, the community and our shareholders expected much more from us. We have made some difficult calls in that time and the new shape of ANZ is now emerging.”

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Mr Elliott said that the bank is halfway through its multi-year transformation strategy, but explained that ANZ will constantly evolve and transform to meet the changing — and challenging — operational environment.

ANZ focused on ‘execution and speed’

When he took over from previous CEO Mike Smith in January 2016, Mr Elliott could see that the Australian banking landscape was shifting.

He said: “We saw the operating environment going to be much more different than what it has in the last 20 or 30 years, and we needed to get ready to deal with that. And so we’ve been transforming our business. We’ve been reshaping the bank. We’ve been changing the way we work and been really focused on execution and speed.”

The chief executive believes that this reshaping will become a constant for the bank in a “fast-changing world”.

“The expectations of the community change fast, the expectations of our customers change fast, and so we constantly have to be changing. What we’re trying to build at ANZ is really an agile, flexible approach that allows us to respond to those needs really quickly.”

Watching mortgages ‘like a hawk’

A major part of ANZ’s strategy has been the divestment of Asian assets, a legacy of former chief executive Mike Smith’s tenure, and a decision to move away from wealth and further towards retail banking in Australia and New Zealand.

In the 12 months to 30 September, the bank grew its retail business with an emphasis on owner‐occupied home lending. ANZ added 178,000 new mortgages to its portfolio over the year, 66 per cent of which were owner-occupied loans.

In Australia, ANZ has introduced First Home Buyer Coaches to help customers navigate the home buying process. First home buyers make up 7 per cent of the group’s mortgage portfolio.

Mr Elliott said that while household debt has increased, the ability for households to withstand economic shocks “has diminished a little”. As a result, the bank is keeping a close eye on its mortgage portfolio.

“It’s a big exposure for any bank so we watch it like a hawk,” Mr Elliott said. “I mean... we look at the data literally on a daily basis to try and understand, you know. It’s in our interest to make sure that our customers borrow responsibly and so we do look at that.

“Household debt levels are high. They’re higher than they have been in both Australia and New Zealand. And they’re reasonably high on an international basis.

“There’s some good reasons why that’s okay, but we don’t want to be complacent about it. So, I think we get paid to be cautious and to be prudent. That’s the nature of banking.”

[Related: Household debt now at $2 trillion: Treasury]

ANZ watching mortgage book ‘like a hawk’
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