ANZ is counting on its new slim profile to help it squeeze through tough times as lending standards tighten following banking royal commission revelations of lax background checks and poor record keeping
The bank on Tuesday unveiled a 16 per cent fall in first-half profit to $2.88 billion, largely on the back of a previously disclosed loss from its divested wealth businesses.
Things looked rosier once the impact of those divestments was stripped out, with cash profit from continuing operations for the six months to March 31 rising 4.1 per cent to $3.49 billion, but that was only after expenses fell by $76 million.
Operating income from continuing operations fell 1.7 per cent to $9.81 billion and net interest margin – a key measure of profitability – dipped 0.05 percentage points over the half as the benefit of recent mortgage repricing faded.
Loan growth has already been slowing and chief executive Shayne Elliott said that could be exacerbated by ANZ toughening approval processes after the royal commission heard it did not fully verify mortgage applicants’ expenses.
“There”ll be more likelihood we say ‘no,'” Mr Elliott said on Tuesday.
“Where in the past, on balance, we would have said ‘yes, we know you’re a good customer, I don’t have exactly all those documents perfect but I’ll make a judgement’ – I think that’s less likely in the future.”
And Mr Elliott said difficult underlying conditions were likely to continue into the foreseeable future.
“We expect revenue growth for the second half of 2018 to continue to be constrained,” Mr Elliott said.
“Historically high levels of household debt and low wage growth will offset some of the positive impact of recent strong employment data, so consumers are likely to remain cautious.”
Nonetheless, Mr Elliott said his efforts to simplify the lender’s business through divestments and refocus domestically would leave it strongly placed.
“We think that the only way for us to win in the eyes of our customers is to do a few things and do them really well,” Mr Elliott said.
“And in order to get there we need to sell some things, shrink some things, stop doing some things.”
The positive continuing operations numbers stripped out the OnePath pensions and investments business sold to IOOF and life insurance business sold to Zurich.
Both deals are expected to close in the first half of the 2019 financial year.
ANZ shares closed 65 cents, or 2.4 per cent, at $27.49 amid strong gains by all big four banks.
ANZ H1 RESULTS
* Cash profit down 16pct to $2.876b
* Cash profit from continuing operations up 4.1pct to $3.493b
* Statutory profit up 14pct to $3.323b
* Interim dividend flat at 80 cents, fully franked