ANZ $929m half-year profit dragged down by softer housing market

Wednesday, 1 May 2019

ANZ says New Zealand is well positioned in spite of global uncertainties.

The slower housing market and more competition in lending have reduced ANZ's half year after-tax profit by 4 per cent to $929 million in New Zealand

Chief executive David Hisco blamed lower interest rates, intense competition, and housing as main causes for the reduction in the six months to the end of March.

ANZ chief executive David Hiisco blamed lower interest rates, softer housing market and competition for a reduced profit.

Hisco said changes in the economy were reflected in the profit on income of $2.2 billion, up 8 per cent thanks to one-off items such as the $59m sale of life insurer OnePath Life.

'The housing market has levelled off, particularly in Auckland which has been the growth engine of that sector over the past 10 years.

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'When you combine that with historically low interest rates, intense competition in home lending that has impacted bank net interest margins, and our fee reductions, underlying revenue growth has been muted.

'International uncertainty hasn't helped exporters, and tourism numbers, particularly from China, have been flat. While we are seeing welcome signs of a pick-up in investment, commercial and agricultural customers are still being cautious with their borrowings.'

Hisco said the low levels of credit losses during the half year reflected improvements in credit quality and a benign credit environment.

Despite the economic uncertainty, he said that with low unemployment and interest rates and China likely to be the global growth engine for many years to come, New Zealand was in a good position to prosper.

'We need to be careful as a nation not to talk ourselves out of maximising our opportunities.

'The economy has strong foundations, we have many clever, innovative and hard-working businesses with a bright future, and all indications are that the May 30 Budget will be solid.

'As always, New Zealanders, particularly home owners, need to take advantage of the low interest rate environment to pay off as much debt as possible so they're in a stronger position should circumstances change,' Hisco said.

Other highlights for the first half of the financial year include the launch of a Healthy Home Loan Package last month which has discounts off standard home loan rates for customers who choose to build or upgrade their homes to sustainable standards, supporting ANZ's $100m pledge in interest-free loans for home insulation, announced in May last year.

Hisco said this financial year was the first without sales targets for front line staff.

Staff had embraced the cultural change away from sales targets while ensuring high performance, he said.

ANZ had offset revenue pressures through its continued focus on digital innovation and customer service while maintaining strong credit quality and cost discipline.

'Since 2010 we have maintained our leading market share with no change to our cost base, while investing more in digital products and services to make our business more efficient.

'This means we've been in a position to pass cost savings on to customers and reduce fees on more than 40 products and services worth about $70m in annual revenues while strengthening our competitive position.'