ANZ says the housing market helped propel it to a cash profit of $968 million in the six months to March 31, an increase of 1% from the same period last year.
Its statutory profit, which includes gains and losses from economic hedges, rose 18% to $1.06 billion.
Chief executive Antonia Watson said it was a strong result that reflected the strength of the housing market, despite headwinds.
“Spring and summer are the busiest times for the housing market, and although property values have fallen 4.1% since the peak in November, they are still well above what they were. one year ago.”
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She said that if falling property prices were a concern for the bank on behalf of homeowners, the bank was well placed to address it.
Borrowers had good levels of equity and house prices have risen 40% in recent years. Economists had indicated that it would take prices to fall by 30% to return to where they were at the start of the pandemic.
For ANZ, only 6% of home loans had a loan-to-value ratio above 80%, meaning that 94% of clients had at least 20% equity in their properties.
Borrowers were also tested on higher rates when they applied, she said. ANZ data shows more than a third of customers are ahead on their home loan by six months or more.
She said people “tighten their belts” during tough times, which is what the Reserve Bank wanted them to do when it raised rates. “The important thing is that we have very high unemployment and that doesn’t seem to be changing anytime soon, which is really positive.”
She said tighter restrictions on lending to value and new lending rules introduced by the Credit Agreements and Consumer Credit Act had an impact on the amount of loans the bank could grant.
These rules required lenders to more rigorously assess how well borrowers could pay their loans. Watson said that meant 6% to 10% of loans were turned down that could have been approved previously.
She said that while the intention of the changes was good, ANZ’s experience showed that the number of people having problems with their home loans had always been low anyway.
A significant number of people had experienced job losses and uncertainty during the early Covid-19 lockdowns, but still recovered well. The government recommended tweaks to the rules, suggesting they were being enforced more strictly than expected, but Watson said that was still not enough.
ANZ’s market share for home loans fell from 30.38% in September 2021 to 30.66% in March 2022.
She said while New Zealand’s economy proved more resilient than expected in the first half of the financial year, there had been a noticeable shift in consumer sentiment. Customers were increasingly concerned about the rising cost of living.
“With inflation and interest rates rising, and global uncertainty growing, we are starting to see New Zealanders tightening their belts and the current environment remains a challenge for many small and medium-sized enterprises.
She said higher interest rates would generally lead to higher margins for banks, but that could be offset by market competition.
While home loans rose sharply, business loans were weaker, rising just $900 million over the six months.
“Many of our commercial clients tell us that borrowing more money is often not the answer. While we work with those looking for additional working capital support, many are using their existing cash resources or facilities,” Watson said.
She said market volatility and the transfer of $513 million of KiwiSaver’s default customer money to new default providers meant KiwiSaver’s funds under management fell from $19.1 billion to $18.5 billion.