ANZ’s annual earnings climb on home loan boost, higher interest rates

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FILE PHOTO: The logo of the ANZ Banking Group is displayed in the window of a branch in central Sydney, Australia

By Harshita Swaminathan

(Reuters) -Australia and New Zealand Banking Group Ltd on Thursday reported a rise in annual cash profit, surpassing market expectations, as its home loans business improved and higher interest rates boosted margins in the second half.

ANZ said its home loan application times were back in line with industry peers, following an overhaul to address processing delays that had kept the lender from cashing in on a COVID-driven housing boom.

Shares, however, dropped as much as 4.6% to A$24.67 in their worst intraday loss since June, against a broader financial index that was down 1.4%, as the lender also flagged headwinds arising from wage and vendor cost inflation.

“Despite higher costs we see upside to consensus FY23 core earnings as the NIM leverage has become more obvious,” analysts at Citi said in a note.

The lender also aims to introduce a fully automated digital home loan to further bolster its mortgage loans business, and is planning a pilot programme of a digital home loan in the coming weeks.

ANZ’s group net interest margin, a key measure of profitability, grew 10 basis points from the first half to 1.68% in the second half of the year.

Runaway inflation has pushed the Australian central bank to pursue its most aggressive tightening cycle in decades, boosting margins for banks that had grappled with record-low interest rates for the past two years.

The bank said it expects the environment to be supportive for margins in the first half, although any change from the exit margin is likely to be more modest.

Annual cash profit from continuing operations was A$6.52 billion ($4.23 billion), beating a Visible Alpha consensus estimate of A$6.31 billion.

The bank proposed a final dividend of 74 Australian cents per share, compared with 72 cents last year.

($1 = 1.5408 Australian dollars)

(Reporting by Harshita Swaminathan and Sameer Manekar in Bengaluru; Editing by Devika Syamnath and Sherry Jacob-Phillips)