ANZ CEO rues ‘overly conservative’ lending policy

ANZ has released a market update for the first quarter of the 2019 financial year (1Q19), reporting that its home loan portfolio contracted by $534 million (0.2 per cent) over the quarter, with both owner-occupied and investor lending growth weighing on ANZ’s overall mortgage performance, which trended 0.7 per cent below system (0.9 per cent).

Owner-occupied lending grew by 0.4 per cent in the three months to 31 December 2018, trending 0.9 per cent below system (1.3 per cent), while investor lending flows dropped by 1.4 per cent, trending 1.5 per cent below system (0.1 per cent).

ANZ revealed that in the 2018 calendar year, its mortgage portfolio grew 1 per cent ($2.7 billion), 3.2 per cent below system growth of 4.2 per cent.

Reflecting on the results, ANZ CEO Shayne Elliott attributed the bank’s mortgage performance to weakening market sentiment and conceded that some of ANZ’s credit policy changes may have stunted lending growth.

“Consumer sentiment has remained generally subdued with uncertainty around regulation and house prices impacting confidence,” Mr Elliott said.

“While we are maintaining our focus on the owner-occupier segment, we acknowledge we may have been overly conservative in our implementation of some policy and process changes.”

In response to heightened regulatory scrutiny over the past 12 months, ANZ has implemented tighter credit policy measures, including the reduction of LVR caps, the introduction of tighter assessments of living expenses, and the reduction of interest-only terms.

However, Mr Elliott added that the bank has taken steps to “prudently increase volumes in the investor space”.

The ANZ market update also revealed that switching volumes for borrowers moving from interest-only to principal and interest during the quarter was $6 billion, of which $4 billion was contractual, with the total amount of contractual switching scheduled for the reminder of FY19 is $12 billion.

According to ANZ, customers choosing to convert ahead of schedule during the first quarter was in line with the quarterly average for FY18 ($2 billion), adding that switching volumes in FY18 totalled $23 billion.

ANZ’s market update follows the release of Westpac’s 1Q19 results.

In contrast to ANZ, Westpac reported above system owner-occupied home lending growth of 5.2 per cent in 1Q19, a slight improvement from owner-occupied growth of 5.1 per cent in 1Q18.

Investor lending growth declined sharply, however, from 4.8 per cent in 1Q18 to 0.8 per cent in 1Q19.

[Related: Westpac earnings bolstered by rate hikes]