ANZ NZ chief executive sees the economy returning to pre-Covid levels by late-2026. Photo / Mark Mitchell
ANZ New Zealand grew its net profit after tax by 21% in the year to September to a record $2.53 billion.
The country’s largest bank attributed much of the jump to the hedging it did to manage its interest rate and foreign exchange risk.
It reported a $163 million gain from its economic hedges – a turnaround from the $196m loss suffered in 2024.
The impact of hedging was also notable in BNZ’s result, announced last week.
Speaking to the Herald, ANZ NZ chief executive Antonia Watson said the swing from a loss to a gain from economic hedges was the result of market volatility.
She largely looked through it. She noted the big impact it had on ANZ NZ’s headline profit and said this wasn’t really a true reflection of the business.
Indeed, ANZ NZ’s cash net profit after tax only went up 4% to $2.37b.
ANZ NZ grew its lending by 4% and its deposits by 5% over the year, in what it described as a “strongly competitive market”. This saw its net interest income rise by 4% to $2.28b.
The bank’s net interest margin rose by 3 basis points to 2.60%.
Watson defended the pace at which the bank moved to pass on Official Cash Rate (OCR) cuts to borrowers.
She said the criticism that mortgage rates went “up like a rocket”, when the OCR was hiked, and “down like a feather”, when it was cut, was wrong.
Like the other banks, ANZ NZ noted an improvement in bad debts as interest rates fell over the year.
It said that in the past three months, nearly a quarter of those refixing their home loans at lower rates have kept or increased repayments, meaning they’ll pay off their home loans faster.
More than 40% of home loan customers are now ahead on payments by six months or more, and more than 45% have savings buffers of $5000 or more. Farms in strong agricultural sectors are also paying down debt and building resilience.
Watson said: “It has taken New Zealand longer than hoped to recover from the post-Covid rebalancing, but there are now signs the nation’s economy is finally picking up”.
“Global uncertainty hasn’t helped but we expect lower inflation and falling interest rates to flow through and boost the recovery as we head into the new year.
“Confidence is returning, particularly in regional areas. However, Auckland and Wellington, because of the mix of their economies, will take longer to feel the improvement.”
With households and businesses strengthening their balance sheets, house prices stabilising and interest rates significantly lower, Watson said the stage was set for a “cyclical recovery to complement New Zealand’s strong agriculture sector performance”.
“If we don’t have any significant events, we expect the economy – driven by rural New Zealand – to be heading back to pre-Covid levels late in 2026, with the uplift, when it comes, likely to be broad-based,” Watson said.
She cautioned against people expecting it to become much cheaper and easier to get bank loans once the Reserve Bank forges ahead with plans to ease the capital requirements it imposes on banks to keep them strong.
Watson said the two ways the Reserve Bank proposed loosening the rules would only reduce a small amount of the upward pressure the requirements put on the interest rates banks charge borrowers.
Accordingly, she noted ANZ NZ proposed a third option. The Reserve Bank is soon expected to announce the outcome of its consultation, which got under way as soon as Adrian Orr (a fierce defender of the rules) resigned as Governor in March.
On to another issue, Watson said ANZ NZ would keep defending itself in a class action against it for breaches of the Credit Contracts and Consumer Finance (CCCFA) Act dating back to the mid-2010s.
However, she didn’t rule out entering into a settlement.
ASB, in October, agreed to a whopper $136m settlement for disclosure breaches that were also the subject of the class action.
ANZ NZ’s disclosure errors affected a smaller group of customers than ASB’s.
ANZ NZ says its mistakes didn’t leave customers out of pocket.
The situation is controversial, because the Government is changing the law to ensure proportionate penalties are imposed on lenders that breached the CCCFA in the mid-2010s. This isn’t currently the case.
However, responding to criticism for changing the law retrospectively, the Government is now including a carve out in the law to ensure legal action against ANZ NZ continues under the law as it was at the time the breach occurred.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.