ANZ: Deposit competition offsets mortgage repricing benefit

Friday 18th February 2011 1 Comment

ANZ says margin benefits from the repricing of mortgages in this country are being offset by strong competition for deposits.

The bank today reported a 27% rise in first quarter underlying profit in its overall operations to A$1.4 billion (NZ$1.87 billion).

ANZ said group margins nudged up across the quarter but the rate of growth slowed as high funding costs largely offset the gains from asset repricing.

Bad debt charges nearly halved to A$294 million in the period and its Tier 1 capital, a measure of the bank's ability to absorb potential losses, increased to 10.3% from 10.1% three months earlier.

Group lending grew just 2% quarter on quarter which puts annual growth well below the near 10% historical average for Australian banks.

In this country, with the economy slowly recovering, lending was flat quarter on quarter, while deposits grew 4.2%.

"Pricing benefits from the roll-off of fixed rate loans and switching to variable rate loans continues to flow through, however the margin benefit from that repricing has been largely offset by strong deposit competition," ANZ said.

Variable loans comprised 49% of the mortgage portfolio at the end of 2010, compared to 26% at the end of 2009.

ANZ New Zealand had started to put in place plans to improve operational efficiency, including a move to one IT platform and a new regional management structure, aimed at significantly improving service levels and business outcomes over the medium term, the bank said.

It was expected that a one-off charge of about A$120 million would be incurred in the first half of 2011 to fund the integration of IT systems and related costs which would be excluded from underlying profit.

NZPA

Comments from our readers

On 18 February 2011 at 5:59 pm Christopher said:

Deposit rates offset shouldn't have been too much of a problem for ANZ - their deposit rates are bleak.