Presented as a “solid financial result” with all divisions “making a material contribution”, the Australian and New Zealand (ANZ) banking group published its 2022 annual results and its proposal for the declaration of a final dividend on Thursday October 27.
The big four banks reported audited after-tax statutory profit for the full year ended September 30, 2022 of $7.1 billion, up 16% from a year earlier.
Its cash profit from continuing operations was $6.5 million, up 5% from a year earlier, it confirmed, while its Tier 1 common equity ratio was ” strong” at 12.3% and the cash return on equity was 10.4%, he added.
The final dividend proposed by ANZ is 74¢ per share, fully franked, he explained.
The notable attribution of the positive results was the improvement in its home lending portfolio, with ANZ saying it had “renewed the momentum in Australian home lending with application approval times in line with those of its peers”.
Its loan portfolio grew to $283.1 billion in September 2022, up 7% on an annualized basis.
Brokers are the source of 58% of its flow.
He also confirmed that ANZ Plus is in the market with “deposits growing at a faster rate than any other new digital bank in Australia” and that its “all-digital home loan product [is] should be piloting next month”.
The group’s continued risk reduction with the sale of its margin lending business, the formal separation of wealth management activities and the exit from financial planning and advice were listed as key drivers of the current results.
When asked at the earnings press conference whether the current rising rate environment was behind ANZ’s material mortgage growth recently (and whether it is aggressively returning to the market in terms of price), ANZ chief executive Shayne Elliott replied: “I’ve been doing this for a long time. I don’t remember sitting here and saying the home loan market wasn’t competitive right now.
“The home loan market is always competitive…and the nature of competition is changing and who is leading the competition is changing. [and that] is nature.
“Right now the fashion, if you will, is cashback – [it] seems to be the flavor of the day and what leads.
“You have to be in the game about price, but we know, and you know, that actually, although price is of course important, [it] must be competitive, one of the main drivers is confidence in obtaining a [loan] “yes” and get a “yes” quickly. And that’s why capacity building has been so important.
“The other thing I would say is that at ANZ just over half of our flow is traditionally broker-driven, and price is important there, but actually the type of service proposition is really important.
“What that means is brokers need to know, again…confidence – ‘that if I submit this application I’ll get a yes and I’ll get it within a certain timeframe’ – and that’s why we invested so heavily, and we talked about “capacity building” on the slide.
“So yeah, we’re in the mix on price, [but] we are absolutely not the price leader, neither at the level of headlines, nor with discounts and cashback, [we are] absolutely not, but we are in the mix on price and we are in the mix on capacity.
“And importantly, just to add to that, we put a lot of focus here in the slides on risk-adjusted margins and risk-adjusted NIM for a reason.
“That’s actually what we’re focusing on quite heavily in making decisions about growth and appropriate investments.”
Progress made in strengthening the core business
Regarding ANZ’s renewed momentum in Australian home lending and the announcement of its all-digital home lending pilot next month, Mr Elliott explained other key aspects of the group as a whole. .
“This is a strong financial result, with all divisions making significant contributions and demonstrating the benefits of a diversified portfolio,” Mr. said Elliott.
“We have restored momentum in Australian home lending with application approval times in line with our industry peers.
“We continued to reform Australia Retail on ANZ Plus, which is our new digital bank, with deposits already exceeding $1.2 billion and growing at a faster rate than any new digital bank in Australia. “
The CEO said the bank will start piloting its digital home loan with staff in the coming weeks.
“This will see the introduction of a fully automated digital home loan, initially focused on the refinance market, later in 2023,” he said.
The “likely” imminent absorption of Suncorp
M Elliot pointed out that the bank had continued its “systematic de-risking of the bank” – which recently included the sale of its margin lending business to Bendigo & Adelaide Bank and its exit from financial planning and advice.
He said: “Given the progress we have made in strengthening our core business, we have been able to agree [to] the acquisition of Suncorp Bank, which will provide an important platform for growth, particularly in Queensland’s rapidly growing and rapidly diversifying economy.
“Suncorp Bank is a well-run business that will see over one million new retail customers join ANZ, sharing the benefits of a wider range of products and services. It also means the Suncorp Group is able to focus on its core mission of being the best insurance company in Australia and New Zealand,” he said.
“The acquisition, which is subject to governmental and regulatory approvals, will be partially funded by a successful equity fundraising of $3.5 billion.
“This was the largest capital raise in the world this calendar year for an M&A transaction and has been structured to ensure that all shareholders are treated equally.”
How fast is fast these days, anyway?
The latest monthly data from Momentum Intelligence’s Broker Pulse survey (October) provided some interesting insights into lending terms and “peer” industry standards.
The proportion of brokers choosing both non-banks and big banks for their execution times increased last month.
Nearly 40% of brokers surveyed said the number of business days it took to make an initial credit decision was the main reason they used a non-bank institution in September (compared to 27% in August), while 35% said they used a large bank (vs. 29%) for this reason.
But it was the non-major banks that stood out when it came to turnarounds, attracting the highest proportion of brokers out of the lender segments (50%) last month.
The results come despite a slight increase in execution times in the non-bank segment and authorized small depository institutions (ADIs).
Non-bank adjustments reportedly rose two days month-over-month (to seven days), while small ADIs rose two days (to eight days) in September.
Brokers reported that execution times increased in seven of nine non-banks and five of 11 small ADIs.
Overall, turnaround times increased for all lenders, from five days in August to six days in September, according to data from Broker Pulse.
Specifically, execution times held steady at five days for the most commonly used ADIs (those used by more than 20% of brokers surveyed) for the third month in a row, with brokers reporting that they only increased for four of the 12 lenders in this segment.
[Related: ANZ to pay $25m for ‘misleading customers’ over 20 years]