Australia’s ANZ posts record FY profit, investors fret over mortgage pressure

Summary
Companies Declares final dividend of 94 Australian cents per share
Miss compared to consensus estimates on core earnings
External environment will likely remain challenging – CEO
Nov 13 (Reuters) – Australia’s fourth-biggest lender, ANZ (ANZ.AX), said on Monday surging demand for its institutional banking services propelled its annual profit to a record but an aggressive campaign to sell more mortgages flattened its margin, sending its shares lower.
As Australia’s banks redirect focus away from their traditional earnings engine of mortgages, where interest rate increases have spurred competition, ANZ has benefited from an institutional payments platform that it says processes some of the world’s biggest cross-border transactions.
That pushed net profit from the bank’s institutional unit up 53% to overtake its retail unit, by dollar value, in the year to September, and helped the Melbourne-listed company grow overall profit 14% to A$7.4 billion ($4.7 billion), just missing a Visible Alpha consensus forecast of A$7.56 billion.
But analysts expressed concern about a faster-than-expected narrowing of profit margin from the bank’s retail unit, the only one of Australia’s so-called big four lenders that has persisted with offering cash handouts to lure mortgage customers looking for a cheaper deal.
Even as ANZ’s institutional division grew its net interest margin (NIM) – the interest it collects on loans minus interest paid to deposit-holders – the bank’s overall NIM declined 10 basis points to 1.65% in the six months to September, more than NIMs reported this month by rivals Westpac (WBC.AX) and National Australia Bank (NAB.AX).
ANZ shares were down 2.7% by midsession, against a 0.2% dip on the overall market (.AXJO), amid worries about whether the bank was sacrificing profitability for mortgage volume which had lagged in previous years.
The logo of the ANZ Bank is seen at Lambton Quay, in Wellington, New Zealand November 10, 2022. REUTERS/Lucy Craymer/File Photo Acquire Licensing Rights
The retail banking result