ANZ is giving the buy now pay later sector a wide berth, even though the bank’s board was presented a detailed review of the burgeoning industry this week.
The global buy now pay later sector was the latest topic for a deep dive report presented to the ANZ board, coinciding with David Gonski’s final meetings as chairman this week.
Previous reviews by the bank have included blockchain and cryptocurrencies, as ANZ sought to get a handle on where those sectors are heading and whether it should get involved.
Despite rivals Commonwealth Bank and Westpac having a foothold in the BNPL sector, through partnerships with Klarna and Afterpay respectively, ANZ isn’t jumping on the bandwagon.
It’s a topic chief executive Shayne Elliott seems adamant on.
“It (BNPL) doesn’t really fit into improving the financial wellbeing of our customers. I’d rather that we put every dollar and every moment of our time into being better at the core things we do,” he told this column.
Elliott reckons partnerships and tie-ups often don’t work, particularly if the parties take their eye off the ball and issues emerge.
“It’s been generally a road to problems, because guess what happens when you do all these things, well you don’t pay attention to them you don’t understand them.”
The other point Elliott made was that the characteristics of ANZ customers using buy now pay later services were not highly attractive to the bank.
ANZ’s analysis showed users of instalment payments were typically younger, with lower levels of savings and a higher risk profile.
“Their propensity or probability of being late on a payment or getting behind on their obligations to the bank is about two times what other customers are,” Elliott said of the bank’s analysis.
Westpac this month partnered with Afterpay to offer savings accounts and cash flow tools for budget-focused customers. The move saw the bank subsequently sell down a small strategic stake in that group’s ASX-listed rival Zip.
Both NAB and CBA — with the usual fanfare — last month talked up their latest plays to get younger customers using more of their products. They pushed into credit card options that charge no interest but levy a monthly fee when the card is used.
This columnist is highly sceptical that young customers will rush to take up those card products, but time will tell.
For ANZ, Elliott’s focus appears to be more on harnessing data and looking at new ways the bank can sell itself as a service.
Areas on the radar include foreign exchange clearing on behalf of other players, and winning work from smaller and offshore banks related to access to the New Payments Platform.
ANZ plans to give an update on its data and technology investments and its $8bn cost target in its first half.
Elliott said after “cleaning up” ANZ’s portfolio of businesses he intended to shed more light on the next leg of his strategy.
“We know that economies that go through crisis always come out looking very different. Businesses that get ahead of that will do really well. At some point it (investment in data and new products) will start to be material where we need to come out of the closet a bit on that.”
Loan watch
With ANZ’s loan repayment deferral numbers tracking well as the majority of customers resume paying, the risks do appear to be subsiding.
That of course assumes that Australia doesn’t endure a third wave of COVID-19 infections, and any further localised or citywide lockdowns.
NZ is tracking at just 2 per cent of ANZ’s mortgage book now on deferral, and Australia could better that proportion in coming months if current trends are anything to go by.
Of ANZ’s one million home loan accounts in Australia about 95,000 had a deferral on their repayments. By the middle of this month, 55,000 of those had their repayment pause come up for review and 79 per cent opted to start paying again in full.
The reopening of state borders and targeted travel bubbles will also aid those numbers.
As banks work through billions of dollars of loans the other key question is whether demand for credit will pick up. Elliott expects annual housing credit growth of about 3 per cent, but thinks business credit will remain soft at zero growth in the near term, reflecting fragile confidence.
Game on
AMP shareholders will be keen to see whether global alternative investment manager Ares Management can put forward a compelling offer for the 171-year-old wealth and asset management group.
Some large institutional shareholders think an offer in the order of $5bn won’t cut the mustard, given AMP’s large surplus capital balance of more than $1.5bn.
AMP has already returned a small amount of funds to shareholders via a special dividend, but not as much as was hoped from its $3bn life insurance divestment.
Ares operates across credit, private equity and real estate equity and debt. The private equity arm doesn’t have any exposure to financial services assets, judging by the website, but it also has a special opportunities focus.
Credit Suisse and Goldman Sachs are the defence advisers to AMP, and they will no doubt want to create bidding tension if Ares is a serious contender for the target.
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