ANZ annual profit falls 27% as Covid-19 bites

Thursday, 29 October 2020

ANZ Bank’s profit has been hurt by the Covid-19 pandemic.

ANZ’s annual profit in New Zealand fell 27 per cent as the country’s largest bank braces for about $400 million in lending losses due to the economic impact of Covid-19.

After-tax profit dropped to $1.336 billion in the year to the end of September from $1.825b a year earlier, ANZ said on Thursday.

Banks have been hard hit by the coronavirus pandemic, offering mortgage deferrals and writing down the value of loans as customers struggled to make payments. ANZ has offered home owners and business customers loan repayment deferrals of up to six months, as well as the option to restructure loans and extend loan repayment deferrals for a further four months.

“Covid-19 brought unprecedented challenges to our country and consequently for many businesses, including ANZ NZ, and this is reflected in our full-year result,” said ANZ Bank New Zealand chief executive Antonia Watson.

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“Despite the difficult year, ANZ NZ has continued to perform well, demonstrating it can weather challenging economic conditions and play an important role in supporting customers through the crisis.”

ANZ NZ has so far provided financial help to about 43,000 personal, home and business loan customers through repayment deferrals, moving to interest-only, or loan adjustments covering lending of around $27b, Watson said.

Some 24,000 of its 529,000 home loan accounts had deferred their loan repayments with about 10,000 accounts still on a deferral plan as of October 15, representing about 2 per cent of the bank’s mortgages.

The bank set aside $401m for expected lending losses due to the weaker economic conditions, up from $99m last year.

Watson said she was feeling more optimistic than a few months ago. Still, she said the next few months would be difficult as wage subsidies and loan payment deferrals came to an end.

“We are still definitely to see some of the worst impacts on our customers, I suspect, as some of the stimulus is rolled off,” she said. “We haven't yet seen the impact of that flow through and it's sort of a wait and see.”

Watson expects 5 to 10 per cent of customers with loan deferrals might not be able to resume payments at their usual levels, although she noted many of the sectors most heavily impacted don’t have a lot of lending.

ANZ NZ chief executive Antonia Watson says the next few months will be difficult.

Tourism and retail sectors were struggling more than others, and a higher proportion of customers in Auckland as a result of the city’s second lockdown, she said.

Helped by historically low interest rates, many customers had taken the opportunity to improve their financial situation by increasing savings and paying down their personal or home-loan debt, she said.

ANZ customer deposits increased 11 per cent to $120.9b, while its net loans and advances were little changed from the year earlier at $133b.

The bank had fewer staff, with 5761 full-time equivalents at the end of the financial year, down from 5910 last year.

Its latest profit included a $32m loss on the sale of UDC Finance, while last year’s profit was boosted by a $66m gain on the sale of OnePath Life and a $39m gain on the sale of Paymark.

The bank’s revenue fell 6 per cent, while its expenses increased 10 per cent due to more regulatory compliance and the winding up of its Bonus Bonds scheme.

ANZ NZ did not pay a dividend to its Australian parent after the Reserve Bank introduced a temporary ban on payouts in April, to support financial stability during the period of economic uncertainty brought about the Covid-19 pandemic.

The ANZ Group posted a 40 per cent drop in annual profit to A$3.577b (NZ$3.709b), as it wrote down the value of its assets by A$2.738b due to the impact of Covid-19.

The group will pay an A35 cents a share final dividend, representing 49 per cent of its after-tax profit for the second half of the year.

Outgoing ANZ chairman David Gonski said the increase in dividend from A25c a share in the first half of the year would help support shareholders who relied on dividend income.

The bank’s New Zealand-listed shares were down 3.6 per cent to $19.74 in late afternoon trading on Thursday, and have dropped 22 per cent this year.