ANZ Takes the Conservative Route for the Moment

Like Westpac earlier this week, ANZ has again chosen not to reveal its actual June quarter trading performance.

That’s unlike the NAB which revealed its third quarter unaudited figures last week, and the Commonwealth which does so in November for its first quarter. But ANZ, like Westpac, NAB and the CBA, did reveal details of their capital and loan books and their health and so far they are all good as they recover from the pandemic.

The Covid Delta variant is closing parts of the country and economy again and not too many investors are properly focusing on those dangers, even though the country’s biggest state economy (and banking market) in NSW looks increasingly stricken.

From its report we know that Westpac thinks it might do a buyback after the annual results release in November.

The CBA is doing a $6 billion buyback (based on its very strong June 30 financial position).

The NAB showed last week that its capital position is more than strong enough to do a $2.5 billion and the ANZ in its June quarter release confirmed that it had the wherewithal to follow suit with its $1.5 billion buyback.

ANZ finished the June quarter in a very strong capital position with its CET1 ratio (the top tier) at 12.2%, well above the APRA 10.5% benchmark for unquestionably strong capital.

The recently announced $1.5 billion buy-back will only cause it to fall by 35 basis points to just under 12%.

This could potentially mean further capital returns in the near future – all banks apart from Westpac – have the same capacity for future buybacks.

The bank also revealed a total provision release of $32 million for the quarter. This comprises a provision charge of $21 million and a collective provision release of $53 million.

At the end of the period, the company’s provision balance was $4.25 billion. This gives it a collective provision coverage ratio 1.24%.

ANZ also said in its quarterly report that it had provided around 1,300 mortgage deferrals during the current Covid lockdowns. This reflects just $600 million or so, or roughly 0.2% of loans in a total housing loan portfolio of  about$280 billion.

Furthermore, these deferrals are just 1% of total deferrals provided in the prior 2020-2021 deferral period.

The bank’s Australian Business Lending has around 50 loan deferrals in place or less than 0.3% of its total business loans. This is well below the 24,000 business loans provided with repayment deferrals in the June quarter of 2020.

It’s not a big shock that 80% of the housing and business loan deferrals are on loans in New South Wales. But the bak should see a rise in applications from Melbourne where the hard lockdown continues.

This is good news for the sector, but the longer the lockdowns continue (and the ACT lockdown is started to look worrisome) then those deferrals will rise.

And also watch costs – Westpac’s quarterly had a hint of weakening margins in the September quarter and NAB and ANZ were silent on their outlooks.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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