SYDNEY, AAP – Australia and New Zealand Banking Group has flagged softer revenue and lower margins in the December quarter amid tough competition in the home loans market.

ANZ said its net interest margin – a key measure of profitability – decreased 8 basis points compared to the average of the second half of the 2021 financial year, which it attributed to a continuation of the structural headwinds impacting the sector.

The country’s third largest bank by market value did not disclose profit or revenue figures for the quarter. It outlined a $140 million hit spread evenly over the next two halves due to changes to provide retail and commercial customers with simpler and lower fee options.

ANZ also said softer revenue in its markets business in October would have an impact on first-half results, although the unit’s performance had improved in subsequent months to be in line with trends over fiscal 2021.

“The impact of rising rates, predominantly in New Zealand, and recent deposit pricing changes, are expected to moderate these ongoing headwinds in the second quarter,” it said in a statement to the ASX.


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The bank slightly lifted its home loan book during its fiscal first quarter with “solid progress” to improve systems and processes for simple home loans. Efforts continue to improve response times for more complex home loan applications, it said.

“Given the high levels of refinancing activity in the sector, managing both attrition and margins remain key areas of focus,” the lender added.

The bank’s home loans business has been troubled by slow processing times which had resulted in slowing volumes during the second half of FY21 amid a competitive refinancing market.

The bank said it expects costs to be broadly flat in the first half as it invests in the business at a faster rate.

Meanwhile, the lender has flagged the potential for increasing the size of the current on-market $1.5 billion buy-back, saying it continues to have flexibility to return surplus capital to shareholders.

“Any decision will balance the importance of capital efficiency against maintaining an appropriately strong balance sheet and continued monitoring of the economic situation,” ANZ said.

By 1100 AEDT, ANZ shares were down 3.4 per cent at $26.17 in a weak Australian market.