ANZ Group Holdings Ltd.’s first-half profit met analyst expectations as margin pressure offset a move to claw back a larger chunk of the mortgage market.
(Bloomberg) — ANZ Group Holdings Ltd.’s first-half profit met analyst expectations as margin pressure offset a move to claw back a larger chunk of the mortgage market.
Cash profit came in at A$3.82 billion ($2.56 billion) in the six months to March 31, it said in a statement Friday. That was in line with forecasts of A$3.81 billion from a Bloomberg survey of analysts.
ANZ Chief Executive Officer Shayne Elliott said in a Bloomberg Television interview that “it’s broadly true” that bank margins have peaked and earnings over the next 12 months will be harder to come by.
“There’s no doubt there was a little bit of a sweet spot over the last 12 months for financials in a period of rising interest rates,” he said. “Margins have been falling in Australian banking pretty consistently as competition becomes more and more intense and consumers get a better and better deal.”
ANZ was the second of Australia’s main four banks to report earnings this week, following National Australia Bank Ltd.’s record half-year result on Thursday. Despite strong headline numbers, investors are becoming increasingly concerned that margins have reached their high point, with markets pricing the Reserve Bank of Australia will start pivoting to rate cuts later this year amid signs of fragility in the economic outlook.
ANZ shares reversed initial losses on Friday to trade 1.9% higher as of 1:03 p.m. in Sydney, in line with a move in the broader equity market.
Read more: National Australia Bank CEO Says Profit Getting Harder to Make
NAB on Thursday warned about margins and cautioned on the trajectory of the economy later this year. ANZ’s net interest margin was at 1.75%, missing estimates for 1.83%.
ANZ trumpeted growth rather than profitability. Despite missing expectations on the key profits driver — the difference between deposit rates paid and interest earned from loans — retail banking home loans grew faster than the average market rate while deposits continued to expand.
Little Mortgage Stress
“Our fixed rate rollovers happened much earlier than the rest of the market, so we’re through the worst of it,” Elliott said.
“The cohort — and I don’t mean to sound complacent — is remarkably small of people who are in stress today,” he said. “Normally you’d expect about 1% of people to be in mortgage stress, today it’s about half that.”
This focus on growth follows a number of moves aimed at staking out market share by the smallest of Australia’s big four listed lenders following the A$4.9 billion deal to acquire the banking arm of Suncorp Group Ltd. last year and a major revamp of its digital interface called ANZ Plus.
ANZ Plus reached A$6 billion of deposits from more than 250,000 customers, 30% of which were new to bank, the bank said.
The bank will pay an interim dividend of 81 cents per share, it said, up from 74 cents in October.
–With assistance from Haidi Lun and Shery Ahn.
(Updates share price in sixth paragraph)
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