ANZ reports profit of nearly $2 billion despite effects of Covid-19

Thursday, 28 October 2021

Antonia Watson, chief executive of ANZ, says during the Covid-19 pandemic inequalities have widened.

The country’s largest bank ANZ has made a profit of $1.91 billion, up 39 per cent on the previous year.

The profit covered ANZ’s financial year to September 31.

Chief executive Antonia Watson said the results reflected record lending demand in the housing market, a stronger-than-expected economy, and a significant reduction in provisions for bad debts.

“The ability of many New Zealand businesses to learn from last year’s lockdowns and adapt, and continuing strong global demand for our exports, has meant we were able to release $115 million of the credit impairment provisions we’d made previously into this year’s result,” Watson said.

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But businesses in the tourism, hospitality and education sectors were continuing to feel the effects of Covid-related restrictions, she said.

The housing market, particularly in Auckland, had a strong year, she said.

ANZ made $9.3b in home loans during the year, taking its total home lending to $99b.

“High house prices continue to be driven by historically low interest rates and more demand for houses than are available,” Watson said.

“During the year we believed housing affordability was becoming unsustainable, so we implemented a number of initiatives to try and bring some balance to the market.

It was in everyone’s long-term interests that the heat be taken out of the housing market.

ANZ had adopted higher loan to value ratio (LVR) restrictions for investors , reduced the minimum size of apartments it lent on, introduced a discounted interest rate for new housing and helped fund and facilitate $600m in social housing construction, she said.

Borrowers would face rising mortgage costs with the Reserve Bank projecting official cash rate increases over the next two years, she said.

Watson did not expect to see households struggle as interest rates rose, however.

ANZ is participating in a banking hub trial to try to work out what banking would look like after more branches are closed.

She said ANZ had been only making loans to people able to cope with a 5.8 per cent home loan rate.

The bank’s current 3.7 per cent two-year fixed rate for borrowers with at least 80 per cent equity in their homes.

But uncertainty would probably linger for as long as Covid-19 was a threat, she said.

ANZ has been returning money to customers after closing the Bonus Bonds scheme.

Households increased their savings during the year, with deposits up by 3.5 per cent, but the increase in deposits was far outstripped by increased lending demand.

Watson said she could not speculate whether ANZ would push through the $2b profit-mark in its current financial year, despite the bank’s increased book of home loans, and despite the bank’s margins “improving” back to pre-Covid levels.

Simplicity KiwiSaver chief executive Sam Stubbs said: “There is such a thing as too much profit.”

“We have a commission of inquiry over an industry which is making $120 per Kiwi, and no inquiry into another industry making close to $1000 a Kiwi,” he said, pointing to the Commerce Commission’s probe of the supermarket industry.

“The amount of the money ANZ is making makes them arguably one of the most profitable banks in the world,” he said.

He said the difference between banks’ one-year term deposit rates and their home loans had widened during the Covid period.

Stubbs also criticised ANZ for lending more on homes during the past year, and less to business.

Watson said that was driven by demand for loans from farmers and business owners.

She said ANZ was not declining more loan applications from businesses than before Covid.

“Business lending grew a couple of billion dollars or so during the year. Home lending grew closer to $30b,” Watson said.

ANZ's Kiwisaver business had funds under management rise to $19b, an increase of $2.6b, as global sharemarkets prospered during a period of low interest rates.

The bank had started the process of returning $870m to more than one million Bonus Bonds customers, after closing the Bonus Bonds fund as a result of interest rates falling so low that it was no longer viable.