Home loans boost ANZ
ANZ chief Shayne Elliott’s aggressive push to sign up owner-occupiers appears to be paying off, with the lender’s beefed-up loanbook helping drive its third quarter cash profit to $1.79 billion.
But a key analyst has warned that the property sector and those exposed to it are at risk of a price downturn fuelled by rising mortgage arrears rates, high household debt and low income growth.
Mr Elliott attributed ANZ’s 1.3 per cent growth in mortgage lending during the three months to June, compared with a year earlier, to attracting more owner-occupier customers. This helped to push it above the combined average growth of the home-loan market, at 1 per cent.
“We’ve been growing our business in owner-occupied home loans much faster than the market and actually really reweighting our portfolio towards that and we’re really comfortable with that,’’ Mr Elliott said.
People who are buying a house to live in are the hottest
ticket in town for Aussie lenders as the banking regulator cracks down on property investors amid fears of a price bubble.
The strategy helped drive ANZ’s cash profit for the three months to June up 5.3 per cent on the average first half earnings, to $1.79 billion.
In March, ANZ broke ranks with the rest of the big four by discounting its owner-occupier loans while simultaneously hitting investors harder.
ANZ Australian chief Fred Ohlsson at the time dubbed it the “new reality” of Australian lending and the bank’s major rivals soon adopted the strategy.
The bank’s move to whack mortgage investors has also helped stabilise its net interest margin — broadly its profit margin on lending — at 2 per cent during the quarter.
But respected UBS analyst Jonathan Mott said “one trend worth watching” in the results was the growing level of mortgage arrears, which deteriorated by a further five percentage points during the quarter.
While he said this appeared to be driven from Western Australia and Queensland he said there would be problems if New South Wales and Victoria also tumbled.
“We expect consumer arrears to continue to deteriorate as the impact of consumer leverage, mortgage repricing, and subdued income growth are felt,” Mr Mott said.
“If mortgage arrears begin to pick up in NSW and Victoria we will become increasingly concerned given the extent of the Sydney and Melbourne housing bubbles.”
The reshaping of the bank under Mr Elliott also continued, with a wind-down of some of its institutional business — a key growth strategy of former chief Mike Smith — reducing the division’s risk-weighted assets by $12 billion — or 7 per cent — for the year to date.