ANZ Bank NZ’s profit slips on expenses and impairments

ANZ Bank NZ’s Ben Kelleher has issued his first set of results as chief executive. Photo / Supplied and Getty

ANZ Bank NZ posted a lower annual bottom-line profit, weighed down by higher operating expenses from class-action provisioning, a credit impairment charge, and a weaker economic hedge.

In the year to September 30, ANZ posted a statutory net profit after tax of $2.4 billion, from $2.5b a year earlier. Net
interest margin (NIM), a key gauge of profitability in the banking sector, fell 7 basis points to 2.52%.

Chief executive Ben Kelleher said the result reflected continued progress on ANZ’s 2030 strategy, with growth in customer base, lending and deposits.

ANZ also continued investing in the business for the future.

“While the economy is strengthening, it remains uneven. Kiwis have been through a tough few years, and global volatility is adding to ongoing cost-of-living pressures for customers,” Kelleher said.

“For the most part, households and businesses are weathering the storm.”

ANZ is the fourth of the four Australian-owned banks to issue its annual numbers this year. All have seen bottom-line and NIM compression.

Kelleher, the chief executive, first presented the results. He succeeded Antonia Watson in October.

More detail

The result was achieved on operating income of $5.3b, from $5.2b, as net interest income and other operating income tiptoed higher.

Operating expenses rose to $2.0b, from $1.8b. A credit impairment charge of $42 million, from a release of $25m, and an economic hedge of $53m, from $163m, affected the bottom line.

ANZ posted total assets of $219.5b for the year, up from $210.0b. This included net loans and advances of $163.9b, from $158.7b.

Lending for homes, agriculture and small business was up.

Total liabilities were $198.7b, up from $190.1b, with $160.7b of these being deposits and other borrowings, up from $153.3b.

Class action

ANZ said its 9% higher expenses included the impact of a $125m provision, up from nil, relating to the Credit Contracts and Consumer Finance Act class action.

The provision reflected ANZ’s estimate of its maximum potential liability. The bank has appealed the High Court decision granting summary judgment against the bank to the representative plaintiffs.

Excluding this, expense growth was 3%, with ongoing cost discipline helping to offset inflationary impacts while allowing for higher investment.

Cash profit was up 1% excluding the class action provision.

Last year, ASB settled a separate class action with the law firm for $135m.

Pressures

ANZ said higher fuel costs, soft housing and labour markets, and interest rate rises continued to pressure households and businesses.

“We’re watching things closely, but for the most part people are managing higher costs and reprioritising their spending,” Kelleher said.

He said many of ANZ’s home-loan customers were benefiting from earlier falls in fixed mortgages, with around 85% of fixed loans below 5% rates.

About 47% of home-loan customers were at least six months ahead on repayments, and almost half of them had a savings buffer of $5,000 or more, Kelleher said.

While some industries, such as hospitality, have been hit harder than others, the bank was seeing broad resilience across its business and agri customers.

“Further pressure could come from higher input costs linked to conflict in the Middle East and the emerging El Niño event,” Kelleher said.

“But high commodity prices, the Fonterra capital return and a lower New Zealand dollar mean the majority of agri customers enter the period in a strong position.”

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