ANZ to woo business and home borrowers in bid to grow bank
The Melbourne-based lender, led by chief executive Nuno Matos, must grow its retail and business arms to challenge its rivals.
ANZ’s new chief executive is baffled by the bank’s conservatism in lending and wants to dial up the risk, hoping the returns will follow.
Market leading loan-loss rates in retail and commercial lending, where arrears are abnormally low, present a conundrum for Nuno Matos, who is engineering a turnaround at the bank and thinks it can compete harder for good borrowers.
Ruling off its full-year earnings on Monday, ANZ posted a largely flat performance from both divisions which trail the other big four.
Mr Matos said the two divisions should be stronger challengers to the bank’s rivals. He conceded both divisions had “underperformed”.
Mr Matos said the bank’s retail division had grown deposits at nearly 12 per cent, but said both it and the business lending arm had “a lot to do”.
He pointed to the Business & Private Bank, where ANZ had underperformed the market, noting it was a key area of investment under him.
Already ANZ has announced plans to set up a banker training program, alongside a push to offer its Transactive Global payments suite to small and medium enterprises.
But Mr Matos said ANZ’s business bank arm was “arguably … too conservative” in its lending, noting the long-term loss rates on bad loans were tracking at half the levels reported before the Covid-19 pandemic.
He said ANZ’s non-performing loans of just $8bn or 0.79 per cent of total exposures was at the lowest end of rival banks.
ANZ booked a $441m credit impairment charge, with one particularly troubled customer responsible for a $327m provision.
However, the bank said its credit quality was still sound, with a modest increase driven by lower write-backs and recoveries.
“We could argue we should a little bit expand our appetite,” Mr Matos said. “Having said that our expansion is not on top of credit appetite.”
Mr Matos told The Australian he wanted the bank to be “very adequate” in how it delivered credit to companies and individuals “as is expected by our regulators”.
But he said the bank could “optimise” how it reached its 2.6 million customers.
Mr Matos said the business segment could be very profitable for ANZ. “It’s a medium to long term strategy, it’s already started.”
But ANZ is also facing down the rise of non-bank lenders and private credit companies, which have peeled off customers from the bank.
Mr Matos said private credit was a consequence of customer demands “and the fact that undoubtedly regulation … creates a certain level of challenges for banks to have profitable lending in their balance sheets”.
“It’s an industry that is delivering to customer need, we respect that,” he said.
ANZ has seen its competitors squeeze the bank on lending margins, with group net interest margins down 2 basis points over the year to 1.54 per cent.
Net interest margin is the core measure of profitability on the money ANZ lends and the yield deposits receive.
Mr Matos said ANZ was also targeting growth from its retail arm, amid plans to consolidate Suncorp Bank and the legacy banking platform under the ANZ Plus banner.
He said he intended to double down on the bank’s franchise home lending model, which sees Australians able to purchase the right to write bank home loans.
“We would be accepting more franchisees and make sure we continue to expand our own proprietary strategy,” he said.
But Mr Matos said he didn’t want ANZ to be competing on the price of home loans.
Instead he said the bank should focus on its capabilities, including faster refinancing of loans and offering new products to borrowers.
Mr Matos also acknowledged ANZ had been slow in turning around home loans.
The ANZ boss, who recently started renting in Melbourne, offered his thoughts on the housing market in Australia, insisting that “there is work to be done” to improve supply while acknowledging that the problem is not “homogenous” across all states.
“It also seems to be very clear that the administrations are attempting, both at federal and local (level), a lot of measures to normalise the situation, to deliver housing for people that need it,” he said.
But he would not be drawn on whether he supports calls made last week by his counterpart at Westpac, Anthony Miller, who suggested more homes at the price point of $500,000 should be built to help young people earning the average salary of around $90,000 put a foot on the property ladder.
“I’ll leave that for the experts,” Mr Matos said.
Quizzed on ANZ’s work-from-home policies in light of a recent ruling that went against rival Westpac, Mr Matos insisted ANZ has no plans to change its policy of 50 per cent onsite attendance, adding that in-office work was good for mental health.
“I believe that the benefits of work in the office, in terms of collaboration, in terms of productivity, in terms of innovation, in terms of career development, and in terms of mental health, are obvious,” he said.
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