ANZ New Zealand result: ‘A sign of the times’

ANZ New Zealand has released its first-half result. Photo / NZME

ANZ New Zealand’s chief executive Antonia Watson says the bank’s modest increase in net profit over the first half was a sign of the times.

The bank – New Zealand’s biggest – raised its cash net profit by 1% to $1.161 billion in the first half-year to March compared with the same year-ago period, reflecting the state of the economy and flat costs.

Against the six months to September 30, 2024, the profit was a 3% improvement.

The bank’s statutory net profit was $1.277b, up 21% over the September six-month period, driven by $116 million from economic hedges.

ANZ uses hedges to manage interest-rate and foreign-exchange risks, and gains and losses from these hedges reverse over time.

“It’s a nice, steady outcome that is pretty reflective of the times that we live in,” Watson told the Herald.

She said revenue was mostly flat, as were costs, so a 3% increase in cash profit meant it was “steady as she goes”.

“It’s a nice, steady outcome that is pretty reflective of the times that we live in,” she said.

Loan delinquency – customers who are more than 90 days late with their repayments – represented about $1b in lending, out of total of $150b.

“We expect our 90-day-past-due delinquency to keep ticking up a little bit, but it’s pretty near its peak,” she said.

She welcomed the Reserve Bank’s review of bank capital requirements.

“Times have changed since 2019 when they first set off on this journey of increasing our capital,” she said.

Watson said the Reserve Bank’s capital rules would equate to an increase in minimum regulatory capital required of $5.4b by July 1 this year.

Net interest margin – the difference between the interest the bank earns from lending and the interest it pays for deposits – rose by three basis points to 2.60% as improved home lending margins were offset by lower term deposit margins.

Watson said the result came at a time of global uncertainty and market turmoil.

“Our performance reflects the broader economy we operate in,” Watson said.

“Many Kiwis are starting to feel the benefits of a lower-inflation and interest-rate environment and our farmers are seeing strong commodity prices.

“However, global uncertainty is likely to keep firms cautious about taking risks for a bit longer, slowing the recovery in investment and employment.”

ANZ NZ chief executive Antonia Watson.

ANZ’s economists have revised down their forecasts for both activity and the Official Cash Rate, which stands at 3.5%.

“Kiwis are very aware of what is going on in the economy and we are seeing this play out through our customers’ behaviour,” Watson said.

Almost 40% of ANZ’s home loan customers were ahead on their payments by six months or more and 45% have a savings buffer of $5,000 or more in place.

Over the past three months, just under a quarter of all home loan customers refixing at a lower rate have either kept their repayment amounts the same or increased them, which means they will now be paying off their home loans faster than before, the bank said.

ANZ said cautious consumer spending was impacting on some sectors, such as retail and hospitality.

Watson said many business and agricultural-sector customers were reluctant to take on more debt in the current environment.

“While there are still challenges ahead, we’re seeing encouraging signs that New Zealand’s economy has some firm foundations and there are green shoots,” Watson said.

“It’s important to note that while it is now looking like it will take a little longer, the New Zealand economy is forecast to continue to improve as the impacts of interest rate cuts work their way through.”

Since last August, the Reserve Bank has cut the Official Cash Rate by 200 basis points and fixed home loan rates have fallen even more, providing some relief for home loan customers.

By the end of this year, around 86% of ANZ’s customers with a fixed interest rate higher than 6% will roll off on to lower rates.

These borrowers could potentially see 100 basis points or more coming off their home loans when they refix, Watson said.

For someone with a $500,000 loan, this could mean monthly savings of around $260 in repayments.

The bank’s revenue for the first half of the year was $2.541b, up 1% on the six months to September 30, 2024.

Expenses dropped by 1%, inclusive of higher wages and operational costs.

ANZ – the parent company – reported a A$3.568b ($3.87b) cash profit, up 12%, and an A83c dividend franked at 70%.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.