ANZ Banking Group chief executive Shayne Elliott says the Hayne royal commission marks a "watershed moment" for the banking sector but warned shareholders it would result in slower loan growth.
"The royal commission impact is real," Mr Elliott said as the lender reported a $3.45 billion half-year cash profit, which was up 4 per cent and matching consensus expectations.
Mr Elliott provided a cautious outlook, saying the focus on responsible lending in the aftermath of the royal commission, which will cost ANZ $50 million this year, would mean loans would take longer to approve and require more documentation.
"People are still going to buy a home, so it doesn't change fundamental demand, but it will change the process and will probably make it harder for people to be successful in their applications," he said.
Mr Elliott said he was confident the bank complied with its obligation but "we are going to be much more robust to make sure we have got everything. It is more likely we will say no when in the past on balance we would have said yes."
Mr Elliott defended the use of expense indices such as the benchmark HEM data in evaluating borrowers because most customers were "poor financial historians" who could not accurately track their spending.
"We think there is a role for a credible index as a check. Having a benchmark that is reliable and robust is very useful. Is there a possibility is gets overused? Yes, clearly."
ANZ was the top performer among the major banks on Tuesday as shares gained 2.35 per cent to close at $27.47. The broader S&P/ASX 200 Index traded 0.54 per cent higher while ANZ's major bank rivals gained between 1.4 and 1.8 per cent.
"For the sector, we think the result should help calm investor nerves about the state of asset quality, particularly in the housing market," Goldman Sachs analyst Andrew Lyons said.
Yet Mr Elliott maintained conditions would become tougher for the banks. ANZ has cut back on unsecured small business and personal loans, and commercial property.
"Our sector has had a golden period for 20-plus years and we don't think that's going to continue, it is going to get harder ... We think revenue is going to be harder to come by for our sector."
Mr Elliott pushed back on suggestions the bank was overly cautious in its outlook but pointed to evidence of reduced credit growth and increased competition.
"There is a slow down in credit demand. It used to be housing system growth was six, now it is four and it is probably still falling – so you have less demand," he said.
"And in that environment it becomes more competitive as people are fighting over that business."
Mr Elliott also pointed to official figures that showed the four major banks were facing more competition from regional and non-bank lenders. "We are growing pretty close to system and the majors are all below system, which means it is the smaller bank growing faster. I don't see that really changing."
A particular bright spot for ANZ was the resilience of the bank's loan book, as it reported a better than expected provision charge of $408 million, a reduction in the loan loss rate from 21 basis points to 14 basis points.
ANZ also reported a five basis point reduction in its net interest margin over the half year to 1.93 per cent. Mr Elliott defended the bank's decision to focus on principal and interest lending to owner- occupied borrowers that had proved less lucrative than higher interest lending to investors. Home owners, he said, were less transactional than investor borrowers and would deliver higher returns over the long run.
Chief financial officer Michelle Jablko said short-term funding costs had picked up in recent weeks, but didn't have a big impact in the first half. Long-term wholesale funding costs and the cost of deposits had improved. If short-term wholesale funding spreads remained elevated, this would have impact in the second half of a "couple of basis points, but there are a few moving parts".
The bank also maintained its target on cutting costs as headcount fell sharply, to 41,580 from 46,046 a year earlier. Mr Elliott said it was "not out the question" that the annual cost of running the bank could be cut from $9 billion to $8 billion over five years.
The ANZ result for the six months to March 31, 2018 was also affected by the sale of its wealth business to IOOF Holdings and its life insurance arm to Zurich Financial Services, which depressed group revenue growth.
Shares in IOOF gained 4.9 per cent to trade at $9.40 after unaudited financial information of the divested wealth unit it had sold was well received by investors.
ANZ declared an interim dividend of 80¢ per share, which was flat, and reflected a payout ratio of 66 per cent of its cash profit, slightly above its stated 60 per cent to 65 per cent target.
Bagikan Berita Ini
0 Response to "Royal commission will hit loan growth: ANZ"
Post a Comment