ANZ announced a Cash Profit of $3.4 billion today, after hiking rates for interest-only lending by as much as 0.40% on Friday.
The $3.4 billion profit was a 23% increase for the bank, and of that, $1.8 billion came from Australian customers. The bumper improvement is being attributed largely to tight cost control by the bank, and a sharp reduction in bad debt.
The results also showed that Aussies are getting their savings in order, with customer deposits up by 7%. But after the spate of recent rate hikes from the big banks and with APRA stepping in to limit high-risk lending, it was the bank’s lending figures that drew the most scrutiny.
ANZ said it currently provided $320 billion in home loan lending to Australian and New Zealand customers, as well as $105 billion in business lending.
“We are growing prudently in home lending in Australia concentrating on owner-occupiers, and through a focus on the small business segment,” said ANZ Chief Executive Officer Shayne Elliott.
The results reflected ANZ’s move away from high risk lending, in response to APRA’s recent restrictions, with a 13% reduction in risk-weighted assets, while home lending in general was up 5%.
These figures come just shortly after ANZ announced changes to its fixed rate mortgages obviously designed to discourage interest-only lending with rate hikes, while encouraging principal and interest loans with rate reductions of up to 0.50%. Principal and interest loans generally present less risk to the bank, and tend to be favoured by owner-occupiers.
On April 22, ANZ increased interest-only owner-occupier rates by 20 basis points, and investor rates by 11 basis points, on top of a 25 basis point hike for investors on 31 March. Over a 12 month period, this equates to an extra $263 million in interest earned for the bank.
The half year results also showed that more and more Aussies are embracing online banking. Now, 60% of ANZ’s Australian customers are digitally active, up from 54% in 2014. In 2014, 71% of “value transactions” were completed digitally, while this year that number rose to 81%.
Elliott said ANZ was “...moving quickly to meet customer expectations by delivering more of our services through digital channels, with digital sales in Australia up 24%.”
Other big banks, NAB and Westpac, are scheduled to announce their own profits on Thursday and next Monday respectively.