‘We weren’t ready’: ANZ’s manual systems overwhelmed by mortgage boom

ANZ chief executive Shayne Elliott has admitted the bank’s reliance on manual processing for home loan applications had failed to keep up with soaring demand during COVID-19, as he declared speeding up turnaround times was the bank’s number one priority.

ANZ reported full-year cash profits had increased by 65 per cent to $6.2 billion on Thursday, but Mr Elliott said this was hampered by sluggish mortgage growth after the bank was caught off guard by “extremely elevated” demand for home loans and refinancing.

ANZ chief executive says the full-year results show the benefits of the diversified business. Credit: Arsineh Houspian

While ANZ’s branch network can quickly approve home loan applications, Mr Elliott said the broker channel – where 53 per cent of its home loans come from – were too slow due to a historic decision to reduce risk by making the process “extremely manual”.

Mr Elliott said the bank had deployed additional staff to assist with processing, but COVID-19 had caused delays in hiring and training new staff, as record low interest rates combined with government stimulus sent the housing market soaring. “Why are we less scalable? We’re less scalable because we’re more manual. We are even more manual than our peer group.”

ANZ would not need to lower prices to grow its home loan book, Mr Elliott said, because it was the competitive prices and refinancing applications that had contributed to the overwhelming level of demand.

“We do not have an issue of people wanting to choose ANZ for a home loan solution. In a funny way, that’s part of the problem,” Mr Elliott said. “We don’t have a problem at the front end. Where we have the problem is processing.”

ANZ’s retail bank executive Mark Hand, who is responsible for growing the bank’s mortgage book and who market watchers believe could be the bank’s next CEO, admitted the bank was under-prepared and pledged to improve turnaround times but said this will take time.

“I’m the first to admit I didn’t pick the boom we saw coming in home loans this year. In terms of our preparedness, we weren’t ready,” he said. “To automate processes, you need to change systems, retrain staff and you do need to put more staff on. The technology solutions, automation solutions we need to put in place simply take time.”

The bank reported 5 per cent growth in its mortgage book over the 12 months to September 30, behind the Commonwealth Bank’s 6.8 per cent growth in the 12 months to June 30. Morningstar analyst Nathan Zaia said fast processing was crucial and predicted ANZ would lose market share if it did not take immediate action.

“In this market, where houses are selling so quickly, it’s even more important that potential buyers can get their pre-approval and approvals done quickly. Otherwise they just end up missing out on a property,” Mr Zaia said. “ANZ had these issues in the past and seemed to get on top of them, but it looks like being inundated with application volumes has again put pressure on their systems.”

‘In this market, where houses are selling so quickly, it’s even more important that potential buyers can get their pre-approval and approvals done quickly.’

Morningstar analyst Nathan Zaia

ANZ’s institutional bank, which serves large corporates and multinational customers, continued cost-cutting while posting $2.4 billion in income for the September half, down from $3.05 billion compared to the corresponding period.

Institutional bank executive Mark Whelan said this division was well positioned to benefit from the growth in sustainable finance, as economies work to achieve to net zero emissions targets.

“We’ve spent the last six months doing a real deep dive into what we’re seeing in [the] sustainability area globally,” Mr Whelan said. “The quality of our customer base both domestically and internationally, they’re the customers who are going to drive this transition.

“That customer base plus our geographic footprint puts us at the forefront.”

ANZ shares closed 0.7 per cent higher at $28.60. A key driver of the bank’s headline profits was a $567 million reduction in the provision for bad loans, caused by an improved economic outlook aided by ongoing government and bank support packages from COVID-19.

As a result, ANZ declared shareholders would receive a full-year dividend of $1.42, more than double the 60¢ it paid out last year, which Mr Elliott said reflected the benefits of the diversified nature of the business.

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