ANZ NZ’s profit flat at $1.3b in half year; bank ups provisions for bad debts
ANZ says 44% of its home loan customers were ahead on their repayments by six months or more. Photo / Alex Burton
ANZ New Zealand (ANZ) has reported a flat profit in the six months to March, and is preparing to potentially absorb more losses from borrowers struggling to repay their loans looking ahead.
The country’s largest bank reported a statutory profit of $1.26 billion in the six months to March – no change from the previous six months and a 1% decrease from the same period the previous year.
While ANZ lent more and collected more in deposits, its “revenue was constrained by ongoing margin pressure”.
The net interest margin of the group’s New Zealand division slipped back five basis points to 2.55% - a reasonably high figure.
The result was also impacted by the bank’s gains from economic hedges, or the way it manages its interest rate and exchange rate risk, dropping.
Furthermore, ANZ put more money aside for credit impairments, as it was wary of the impact conflict in the Middle East could have on the New Zealand economy.
ANZ NZ chief executive Antonia Watson said, “Prior to the war in Iran, New Zealand was in the early stages of economic recovery.
“Confidence was beginning to return as lower interest rates flowed through to customers, with higher commodity prices and strong farm‑gate returns supporting the farming sector and rural economy.
“Strengthened balance sheets and savings across households, businesses, and farms helped support spending and investment.”
Watson noted that more than 44% of home loan customers were ahead on repayments by six months or more, and 48% held a savings buffer of at least $5000.
Export sectors and the wider rural economy were also buoyed by higher commodity prices and, more recently, the Fonterra capital return.
However, she said the conflict was a reminder of how quickly global shocks could ripple through our economy and “undermine what remains a fragile recovery”.
She noted higher fuel, fertiliser and freight costs, together with ongoing supply uncertainty, are weighing on rural communities and are expected to influence investment and growth decisions.
House prices also had a soft start to the year, with the housing market facing weaker confidence in the economic outlook and upward pressure on mortgage rates.
“We’re carefully watching the situation, particularly the combination of inflation, interest rates and fuel costs, which are adding to cost-of-living concerns and denting confidence,” Watson said.
“We continue to hold credit impairment provisions as a safeguard against future uncertainty, and our capital position - an important measure of a bank’s financial stability - remains very strong.”
ANZ has a total credit impairment provision balance of $805 million.
Watson urged anyone struggling financially to contact their bank sooner rather than later, so it could help plan a path through what she hoped would be a temporary situation in terms of the impact of the war.
Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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