Savings keeping borrowers afloat with no RBA relief in sight: ANZ boss

ANZ boss Shayne Elliot says a growing number of Australian mortgage holders are under serious pressure after more than two years of elevated interest rates, but most should have enough savings to ride out the storm into the next year.

Speaking to this masthead on Friday, after unveiling a $6.7 billion full-year cash profit, Elliot said while there was considerable stress in the system, borrowers were still hanging in there.

“While there is stress and while there is more stress than there was a year ago, in the historical context, it’s still really quite low,” he said.

ANZ chief executive Shayne Elliott said competition in the home lending sector continued to be intense.Credit: Alex Ellinghausen

The number of borrowers who are 90 days behind in their mortgage repayments is at a three-year- high, but Elliott echoed the sentiments of the other two big banks that posted their financial results this week, saying the economy was finally turning a corner.

“So actual credit losses, people behind [their repayments], people in hardship – those numbers in an absolute sense is actually modest by an historical sense, and they’re nowhere near where they were before COVID.”

The resiliency of the borrowers, according to Elliott, was built on the foundation of Australians beefing up their savings during the COVID-19 pandemic. That has allowed them to weather the high interest-rate environment, with the Stage 3 tax cuts that kicked into effect this year providing an additional boost.

Elliot added that he expected borrowers who had kept up with loan repayments to be able to manage for another six to nine months, adding the Reserve Bank of Australia would likely begin cutting the cash rate from its current 4.35 per cent “later rather than earlier”.

Loan arrears at ANZ lifted 17 basis points to 1.69 per cent in the 12 months to September 30, while the number of borrowers 90 days behind in their mortgage repayments climbed about 25 basis points to 0.84 per cent – still lower than the historical average of 1 per cent.

ANZ’s cash profits slid 8 per cent to $6.7 billion, just below market expectations, compared to last year’s record amid one-off cost pressures from its acquisition of Suncorp.

Excluding the Suncorp acquisition, ANZ booked cash profits of $6.9 billion. The bank’s net interest margin – a key measure of profitability that compares banks’ funding costs with what they charge for loans – lifted to 1.57 per cent.

Elliott said intense competition in the mortgage market had squeezed its profit margins, but the bank’s focus on growing its ANZ Plus app – and rolling over its 5 million retail customers onto it by 2028 – should help reduce cost headwinds.

One in five active retail customers is on ANZ Plus, which is 35 per cent cheaper for the bank to run, Elliott told investors on Friday.

ANZ, which has lagged the other major banks on mortgage market share, grew its home loans and deposits by 7 per cent. While the others pulled away from price competition over the past year to improve their profit margins, ANZ was offering cashbacks to new customers to grow its loan book.

Elliott said ANZ was committed to growing its home loan portfolio by about 4 per cent while improving its profit margins next year.

“I find it kind of appalling if you’re in the business of helping people buy a home – which is what we do – to say, ‘I’m not going to help people, but I’m going to focus on myself and my profitability over helping people get into a house’,” he said.

“We want more customers, not less, and we want to help more people get into the home, not less. So the onus is on us to do it and find a way to do it profitability ... And the way we do that is by being really focused on productivity, really focused on our turnaround times and being as efficient as we can.”

Elliott’s short-term bonus was slashed by almost half to $1.3 million, while head of institutional Mark Whelan’s was cut by 60 per cent to $565,000, and chief risk officer Kevin Corbally lost 40 per cent to take home $624,000 amid a scandal in the bank’s institutional division.

The corporate and prudential regulators have “heightened concerns” about ANZ’s corporate governance, after traders were alleged to have manipulated the bond rate during a $14 billion federal government debt sale.

Separately, ANZ admitted its markets unit inflated its bonds trading figures and an internal workplace investigation found traders in the Sydney dealing room were inebriated during working hours, prompting the prudential regulator to hit ANZ with a $250 million capital add-on charge.

ANZ will pay a total dividend of $1.66, 70 per cent franked. Shares in the bank lifted 1.2 per cent to $32.09.

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