ANZ NZ records huge quarter of home loan growth and reduces provisions for credit impairment despite softening economy

ANZ New Zealand has posted a 5% rise in unaudited nine month profit as income grew slightly faster than expenses.

At the same time the country’s biggest bank has recorded one of its strongest ever quarters in terms of residential mortgage volume growth, and reduced its provisioning for loan impairments. 

ANZ says net profit after tax rose 5%, or $61 million, to $1.30 billion in the nine months to June 30 from $1.24 billion in the same period last year. 

Net interest income rose $84 million, or 4%, to $2.140 billion. Total operating income was up 3% to $2.907 billion, and operating expenses rose 2% to $1.108 billion. Provisions for credit impairment rose to $58 million from a write-back of $20 million in the same period of the previous financial year.

ANZ said year-on-year customer deposits increased 7% and gross lending rose 5%. In the June quarter, however, term deposits fell $454 million, or 1.3%, to $34.4 billion, and gross loans rose $3.9 billion, or 3.6%, to $113.5 billion.

Mortgage growth surges; Provisions down

Meanwhile, ANZ recorded net quarterly mortgage growth of $1.779 billion in the June quarter. That’s growth of 2.9% versus housing loan growth in the Reserve Bank’s sector credit data of 1.9%. ANZ’s home loan book stood at $63.7 billion at June 30.

The June quarter mortgage growth comes off the back of a strong March quarter, which saw ANZ post its highest quarterly net home loan growth in seven years, $1,275 billion, almost matching the $1.3 billion in the March quarter of 2008.

With dairy farmers under the cosh from falling payouts, you might expect ANZ – as the country’s biggest rural lender with about $11.3 billion of dairy exposure – to be increasing its provisions for credit impairment. However, the bank’s total provision for credit impairment (collective plus individual) was reduced $2 million in the three months to June 30 to $657 million, and it’s down $57 million year-on-year.

Total impaired assets fell $62 million, or 12%, in the June quarter to $440 million. And loans at least 90 days past due but not impaired rose $4 million from March to June to $236 million. At $676 million impaired assets and loans at least 90 days past due, combined, are equivalent to 0.44% of ANZ’s $154.135 billion in total assets. 

ANZ has paid $955 million of ordinary dividends in the nine months to June, equivalent to 76% of its $1.26 billion cash profit. In its last full financial year ANZ paid record annual net dividends of $1.366 billion.

Banking rego breach

ANZ Bank NZ’s disclosure statement reveals the bank has been in breach of its conditions of banking registration.

“The Bank has identified that due to noncompliance with a documented internal process, the Bank was required to include the assets of the associated Bonus Bonds unit trust in the risk weighted exposures for the Banking Group for capital adequacy purposes. As a result, the Bank was technically in a position of noncompliance with Condition of Registration 1B for a period of time,” ANZ says.

“These assets are included in the Banking Group’s risk weighted exposures as at 30 June 2015 and, as at that date, the Bank was in full compliance with its Conditions of Registration. The Banking Group’s capital ratios were not materially affected, and no additional capital is required to be held as a result of including these assets in the Banking Group’s risk weighted exposures. The Bank proactively brought this matter to the attention of the RBNZ, who have acknowledged that the matter is not material, technical in nature, and that no further action is warranted on the part of the RBNZ.”

All New Zealand’s other major banks – ASB, BNZ, Westpac and Kiwibank – have also breached their conditions of banking registration during recent years.

Here’s ANZ’s press release.