The smallest of the Big Four banks, Australia and New Zealand Banking Group Ltd [ASX:ANZ], is having a rough patch today.
The $74.5 billion company has been punished in trade this morning, slipping close to 5% near the open. Thankfully for shareholders, this loss has been paired back to 2.49% at time of writing. A more tolerable fall, but no doubt still painful.
So what’s the reason for ANZ’s big drop off?
Let’s fine out…
Thinning margins, tougher competition
The big blow for ANZ, as they admit, is the fact that their margins are getting tighter.
Group Net Interest Margin fell by eight basis points for the quarter. While their underlying net interest margin also fell by five basis points.
As a result, ANZ is finding it far harder to extract value from its lending. A factor that could continue to eat away at their top- and bottom-line results if low rates are here to stay.
Fortunately for the bank, as they note, New Zealand is already staring down interest rate hikes. A factor that will certainly help the bank’s margins in the coming quarter. And with the RBA potentially eyeing their own rate moves later in the year, that could bring more good news for ANZ.
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As management notes, the focus is to capitalise on the current hot property market:
‘ANZ has made solid progress in Australia to improve systems and processes for simple home loans with application times now in line with other major lenders. Efforts continue to improve response times for more complex home loan applications. Australian Home Loans balance sheet grew slightly in the first quarter FY22. Given the high levels of refinancing activity in the sector, managing both attrition and margins remain key areas of focus.’
What’s next for ANZ?
Looking ahead, it’s clear that ANZ is preparing for a rocky first half to 2022. A factor that shareholders will need to be wary of and prepare for.
However, management is clearly hopeful they can turn things around in the second half of the year. Aiming to make the most of their opportunities in New Zealand in particular.
So, with that in mind, the future of this stock is hard to predict.
What is safe to say, is that they will need to work hard to catch up to their three main peers. Especially with plenty of smaller competitors snapping at the Big Four’s heels.
The fintech sector in particular has plenty of exciting contenders. Companies that aren’t just looking to revolutionise payments, but also traditional lending.
To learn more about what this sector has to offer, check out our full fintech report. Including three of our top picks from this up-and-coming sector to watch in 2022.
Get your free copy of the full report, right now, right here.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here
