Fundies urge ANZ to fix ‘inexplicable’ deposit errors

Fund managers are calling on ANZ to urgently rectify compliance issues, including within its under-pressure retail bank, given the risks posed by regulatory fines and further capital outlays.

APRA chair John Lonsdale has said there are “material gaps” in ANZ’s risk government frameworks.

Fund managers are calling on ANZ to urgently rectify its governance and compliance issues, including within its under-pressure retail bank, given the risks posed by regulatory fines and further capital outlays.

The comments come after The Australian revealed the corporate regulator is investigating allegations ANZ incorrectly calculated interest on thousands of customer savings ­accounts, in the latest of a string of regulatory probes into the bank.

Sources said the Australian Securities and Investments Commission was assessing whether there were systemic governance issues at the ANZ, as it examines whether the bank wrongly calculated, and then incorrectly paid bonus and regular interest on some of its savings and deposit accounts.

ANZ’s customer hardship provisions and the charging of fees to dead customers’ accounts are also being probed by ASIC in the retail division, while the regulator is additionally investigating the bank’s markets team relating to a government bond issuance from 2023.

Atlas Funds Management’s chief investment officer Hugh Dive said it was inexplicable that a major bank like ANZ could miscalculate interest rates on deposit and savings accounts.

“Basic interest calculations have been a key part of banking for several thousand years,” he said.

“It’s not a very good look for a bank to get a really basic thing incorrect.”

Mr Dive said news of ASIC’s latest probe was “not good”, particularly as it came soon after revelations of an investigation into ANZ over its trading team and allegations of bond and futures market manipulation.

He noted ANZ could face regulatory penalties over compliance issues within its retail bank, or high level supervision or the imposition of even more risk capital as an overlay.

ANZ was slapped with an additional $250m capital overlay by the Australian Prudential Regulatory Authority last year due to its tardy management of non-financial risk issues.

This added to ANZ’s existing capital impost for governance failings imposed in 2019 and took the total overlay to $750m.

“This will put them under more scrutiny from APRA, as a result, particularly if it’s determined there was wilful action,” Mr Dive said.

“It shows a system failure and an underinvestment in systems.”

An APRA spokesman declined to comment on ANZ on Wednesday.

In a prior statement on ANZ, APRA’s chair John Lonsdale in August said of the major banks that had capital add-ons applied in 2019, ANZ was the only one to not have its overlay removed or reduced.

“While the bank has implemented actions to improve its risk governance and culture over the past five years, these recent issues suggest there continues to be material gaps that need to be closed as a priority,” he added at the time.

A banking analyst, who declined to be named, said: “APRA has said ANZ had the opportunity to fix these (governance and compliance) issues. That’s telling you something is wrong at ANZ.”

Regal Funds Management’s Mark Nathan’s noted that conduct issues across the sector had been theme for some time.

“You would have thought by now every bank would have forensically examined where the issues are,” he said.

“It would be disappointing to discover additional material and conduct issues which haven’t already come to light.

“The capital impost of conduct issues are a real cost to ANZ, so you’d expect them to work diligently to rectify all the issues.”

Another fund manager, who declined to be identified, said ANZ’s retail banking franchise had been a perennial underperformer, and historically suffered from underinvestment and lack of attention within the broader group.

Atlas’ Mr Dive pointed to ANZ’s lagging market performance with the stock up just 13.7 per cent over 12 months, compared to Commonwealth Bank which has climbed 36.4 per cent, or National Australia Bank which has rallied 23 per cent.

ANZ’s shares rose 0.2 per cent to $30.22 on Wednesday, trailing a 0.3 per cent increase in the S&P/ASX200.

Mr Dive said ANZ’s lower gains reflected the impact of ASIC’s investigations and some investors steering clear of the bank.

“It probably underscores the move to appoint a new CEO from outside the bank,” he added.

ANZ’s retail banking boss Maile Carnegie was considered a contender for the top job before losing out to former HSBC executive Nuno Matos, who succeeds Shayne Elliott in July.

A filing by Mr Elliott this week showed he further trimmed his holding in ANZ, selling almost 7,400 shares.

Canstar’s data insights director Sally Tindall cautioned customers of all banks to monitor the interest rates and terms and conditions on their deposit and savings accounts.

“Keeping a close tab on your interest rate is critical.,” she said. “Rates can and do move outside of any RBA (Reserve Bank)-led change, and in this environment, that’s often down rather than up.”

Ms Tindall also urged customers with bonus saver accounts to understand exactly what was required to earn the higher rate.