There have been a flurry of banking reports coming through for the half-year, with NAB posting strong profits only yesterday. Today we have the results for the Australia and New Zealand Bank, ANZ [ASX:ANZ].
NAB was punished in the share market after its results were shared with the public yesterday. Investors were worried about rising competition for mortgages in an already anxious environment.
This morning, ANZ shared a record half-year, yet it too provided a stoic outlook, echoing NAB’s sentiments.
ANZ was dipping in the stock market this morning, though not as harshly as its peer. Trading for around $22.94 a share by mid-morning, ANZ was flat in year-to-date trade and slightly below the industry average:
Source: TradingView
Strong results for ANZ’s half year report
The big bank posted record half-year profit of $3.82 billion, a 23% increase compared with last year, explaining improvements in the mortgage markets helped push results.
Profits matched expectations and was supported by $8.5 billion in net interest income, 9% more than the same time last year. Additionally, it was driven by a $73.5 billion increase in average interest earning assets and a 17 bps increase to net interest margin.
The operating income of $10.14 billion was a 3% increase from last year following a disbanding of entities worth $65 million and a loss in its financial planning business of $62 million.
Operating expenses had increased by 4% year-on-year to $4.98 billion, an unavoidable increase in today’s high-cost environment as the group processed higher employee numbers, wage increases, and general business spending.
Commercial revenue grew by 30% to $2.6 billion, and loans climbed by 4% as deposits fell by 3%.
Retail customers deposits increased 6% along with retail loans, and New Zealand business was strong.
The home loan book grew by 4% in the period and 6% in the year to $295 billion as ANZ shifted pricing for new business wins, setting the standard for other banks.
The bank declared an interim dividend of 81 cents a share, above market expectations, and was 9 cents higher than interim dividends the previous year.
What ANZ says about the market
The market is hyper-focused on margins and potential competition, and investors in NAB were not particularly pleased with increasing changes in the mortgages market yesterday.
The news came alongside a further rate rise of 0.25% from the FED with no indication now of slowing on that score, and sharp selloffs in major banking platforms ensued.
ANZ CEO Shayne Elliot said competition is increasing in retail banking now ‘as intense as it has ever been’ with the struggles felt in both Australia and NZ.
The group has kept a watchful eye on its margins and was able to report strong home loan momentum in the first half, supported by ‘capability and capacity and an improved broker support model’ with processing issues now resolved.
ANZ’s net interest margin had also risen from 1.68% to 1.7%. However, analysts had expected 1.83%.
There is no question competition is high with Australian housing headwinds blowing into more hotter rates for winning new businesses and customers, and the results today have indicated competitive conditions for mortgages.
Mr Elliot commented, ‘The challenges are very real, the economic cycle is turning, there’s going to be more stress in people’s budgets, whether in households or in businesses.’
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Regards,
Mahlia Stewart
For The Daily Reckoning Australia
