(Bloomberg) — ANZ Group Holdings Ltd.’s profit missed estimates as Chief Executive Officer Shayne Elliott said competition in the mortgage market remained intense.
Most Read from Bloomberg
Cash profit slipped to A$6.73 billion ($4.5 billion) in the 12 months to Sept. 30, from A$7.41 billion the previous year, the Melbourne-based lender said in a statement Friday. That compared with the A$6.81 billion average estimate in a Bloomberg survey of analysts.
The result points to the challenge for the nation’s biggest banks, which are losing the benefits of the high interest rate cycle. With rates potentially poised to fall next year in Australia, that could weigh on margins and intensify the battle for home loans.
Consumer banking is facing a “massive profit challenge,” Elliott told analysts on a call on Friday, for which the only solution is technology simplifications such as its ANZ Plus app that can make the bank a quicker and cheaper competitor.
“Competition and rate cycle uncertainties represent a challenge for the banking sector,” he said.
ANZ is also contending with an investigation by the nation’s securities regulator into the trading of government bonds, while traders earlier this year departed the bank amid allegations of misconduct.
“We are expediting the work we have underway to improve our non-financial risk practices,” Elliott said. “This, along with continuing to drive a strong speak-up culture, is a key focus of mine as CEO — as well as across the bank more broadly.”
The Australian Prudential Regulation Authority in August imposed an increased risk buffer on ANZ’s capital due to the bank’s weaknesses in non-financial risk management. Elliott said Friday he didn’t expect that to be reduced again over the next financial year.
In its Australian retail business, the firm said home loans grew 7%, as did customer deposits. Its institutional unit saw strong growth in operational deposits and markets revenue came in at A$2.2 billion, up 4% on last year.
Hardship Support
“Higher interest rates are impacting customers and we saw an increase in those requiring hardship support,” Elliott said. “Our data shows customers, in general, are holding up better than expected.”
Analysts highlighted the risk to margins and the dividend next year. Profit for the bank might fall another 15%, which would limit payouts to shareholders, according to Bloomberg Intelligence senior industry analyst Matt Ingram.
“ANZ’s targeted 60-65% payout leaves little room for uplift in the face of profit pressure,” Ingram said.
ANZ shares were 0.9% higher as of 1:22 p.m. in Sydney. They’re up 24% this year.
(Updates with CEO commentary, capital buffer outlook, analyst reaction from fourth paragraph)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
Add Comment