ANZ Reports Annual Profit Decline Amid Loan Repayment Surge

By Byron Kaye and Sameer Manekar
SYDNEY (Reuters) – ANZ, Australia's fourth-largest lender by mortgages, announced a significant drop in annual profit as intense competition eroded margins and late loan repayments increased. The bank's cash profit fell 8% to A$6.73 billion ($4.49 billion) for the year ending September, missing the consensus estimate by Visible Alpha of A$6.82 billion. This downward trend reflects broader challenges faced by Australia’s top banks amid high interest rates and cost of living pressures.

Late loan repayments, particularly those overdue by more than 90 days, rose 47% year-on-year, reaching the highest level since 2020. This trend was echoed by larger rivals, Westpac and National Australia Bank, which also reported increased late repayments and decreased annual profits recently. The Commonwealth Bank, also facing similar issues, recorded the highest late repayments since 2020.

Despite these challenges, banks reported receiving more applications for hardship assistance, indicating increasing borrower stress. ANZ CEO Shayne Elliott noted that stress signs are widespread but couldn't predict an interest rate cut timeline. Australia, unlike the U.S. and Europe, has maintained steady interest rates, battling persistent inflation and a strong job market.

ANZ shares rose slightly by 0.6% despite the disappointing results, as analysts assessed the implications of the company’s recent asset acquisition from Suncorp. The proposed final dividend stands at 83 Australian cents per share, lower than last year's 94 cents but in line with market expectations.

The bank’s net interest margin decreased by 13 basis points to 1.57%, and its common equity tier 1 ratio dropped to 12.2%. Furthermore, Elliott mentioned ANZ is reviewing its approach to non-financial risk management amid regulatory scrutiny.

In summary, while other global central banks cut interest rates, expectations for a reduction in Australia remain distant, with projections suggesting February 2025 as the likely timeframe for potential cuts.

($1 = 1.4972 Australian dollars)