ANZ flags margin hit, turnaround fix still in progress

ANZ released its Pillar 3 disclosure report on Monday (7 February), providing an update on its home loan business amid “uncertain trading conditions”.

The bank has flagged that its group net interest margin (NIM) was down 8 basis points (bps) to 160 bps for the first quarter of the 2022 financial year, while the underlying NIM was down 5 bps to 157 bps.

The New Zealand market was noted as the primary driver of the NIM difference.

ANZ pointed to “structural headwinds impacting the sector”, which included competition, rising funding costs and a higher proportion of customers who has chosen fixed-rate products, a spokesperson told Mortgage Business.

The group’s home loan book slightly stepped up from $277.8 billion in the September quarter, gaining $200 million over the December quarter to a new total of $278 billion.

However, growth had remained below system.

Recent APRA data showed that ANZ’s owner-occupier home loan book had slipped by $200 million from November to $173.5 billion worth in December, while its big four rivals had managed to grow.

After struggling to keep up with a flurry of demand through the pandemic, the bank reported that it had “made solid progress in Australia to improve systems and processes for simple home loans with application times now in line with other major lenders”.

“Efforts continue to improve response times for more complex home loan applications,” the bank’s update stated on Monday (7 February).

“Given the high levels of refinancing activity in the sector, managing both attrition and margins remain key areas of focus.”

At ANZ’s annual meeting in December, chair Paul O'Sullivan and chief executive Shayne Elliott explained to shareholders that the bank’s manual assessment systems for broker applications had been overwhelmed by an influx of demand through COVID-19.

ANZ’s home loan book fell by $3 billion from the first half of FY21, down to $278 billion in the second half.

As Mr O'Sullivan recounted, the bank’s lagging loan turnarounds had “resulted in a loss of market share”.

Momentum Intelligence’s Broker Pulse survey reported the bank had an average broker turnaround of 18 days in November.

But ANZ stated that it expects the profitability challenges to moderate in the second quarter, as the cash rate in New Zealand has risen and there have been recent deposit pricing changes.

The bank also hinted that it is mulling an increase to the size of its share buy-back.

“Any decision will balance the importance of capital efficiency against maintaining an appropriately strong balance sheet and continued monitoring of the economic situation,” ANZ said in its statement.

Meanwhile, the bank has also launched a relief package for retail and business customers hit in by bushfires across Western Australia’s South-West, Great Southern and Wheatbelt regions.

The package has included:

• Short-term payment relief on home loans, credit cards, personal loans and some business loans (ANZ has noted it may still charge interest during the period)
• Waived fees for restructuring business loans
• Waived fees for accessing term deposits early

Kathleen Jahour, ANZ general manager, Western Australia, commented: “At the appropriate time, when people are able to shift their focus to recovering and rebuilding, we hope these relief measures will help our customers as they deal with this confronting experience.”

Customers have been told to contact the bank to discuss their options.

The bank also recently established a new chief technology officer (CTO) role, appointing chief architect Tim Hogarth to the role.

[Related: Westpac restructures exec team]