by A strong housing market and a faster economic recovery has helped ANZ boost its first-half cash profit 42 per cent to $962 million.
Its net profit, which includes the impact of hedges to manage interest rate and foreign exchange risk, rose 18 per cent to $930m.
The country’s largest bank reduced its provision for bad loans by $302m at its March 31 balance date, as it didn’t have to write off as many loans as it had expected at the start of the Covid-19 pandemic.
It follows Westpac’s announcement of a 98 per cent increase in first-half profit, and KPMG data showing banks had been too pessimistic about the effect of Covid-19 on their balance sheets.
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“We are in a very different position than we would have expected this time last year, and that’s because of the faster-than-expected economic recovery,” said ANZ chief executive Antonia Watson.
“Businesses are actually doing better than they might have expected to,” she said. “It feels like there is a lot of money being spent in New Zealand on things other than going overseas.”
Watson said she was an example of those spending money at home rather than travelling overseas, having painted her house and bought some new curtains last year.
Sectors such as housing, construction and agriculture had proven resilient while hospitality, international education and many tourism businesses were still being impacted, she said.
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Concerns remained around labour shortages and supply chain disruptions and everyone was aware that things can still go wrong pretty quickly, she said.
Watson said she was “cautiously optimistic” as the country had started vaccinating and begun to open up travel bubbles with Australia and the Cook Islands.
She said the housing market had defied expectations due to historically low interest rates and deposit rates, reduced loan-to-value restrictions and supply constraints.
Home lending by ANZ increased $5.8 billion over the six months to March 31.
“At the moment, growth is coming from housing, that’s for sure,” Watson said. “That’s still going to be an active part of the market because of the low interest rate environment.”
However she said activity in housing was starting to moderate since the Government announced a range of changes at the end of March, including an extension to the bright-line test and the removal of investors’ ability to offset their loan interest against rental income for tax purposes.
“Five of the last six months have been absolutely frantic for us, but the team is saying now, it’s busy – busy not frantic,” she said.
Since December, ANZ has required residential property investors to have a 40 per cent deposit.
She said ANZ’s lending to owner-occupiers had fallen a bit and residential lending had gone down quite a bit.
A few months ago, 16 per cent of ANZ’s new lending was going to first-home buyers, and 36 per cent to residential investment lending. They were now level at about 23 percent, which was positive for first-home buyers, she said.
“Investors have taken a step back and said ‘I better make sure my business model still stacks up’, and that’s allowed the first-home buyers to get a look in,” she said.
She said borrowers needed to ensure they could still service a loan when interest rates rose.
