ANZ Posts $1.9 Billion Q3 Cash Profit as Mortgage Applications Slide 12%
Key Takeaways
- •ANZ's third-quarter cash earnings reached $1.90 billion, beating expectations on the back of improved margins, lower costs, and lower-than-expected bad debt charges.
- •The bank's bad debt charge was $102 million, significantly below analyst forecasts of up to $205 million, while non-performing loans remained stable.
- •Home loan applications at ANZ fell 12% after the federal government removed property tax concessions for investors, with major banks across the board reporting declines of 12% to 20%.
- •Australia's housing market is losing momentum, with auction clearance rates at six-year lows and average property prices down approximately 2% over four months.
- •ANZ finished June with a common equity tier one capital ratio of 12.51%, and its shares initially rose as much as 3.4% following the third-quarter results.
ANZ has delivered a stronger-than-expected third quarter, with cash earnings reaching $1.90 billion, as improving margins, lower costs, and weaker-than-expected bad debts helped offset a sharp slowdown in mortgage demand.
The bank reported that home loan applications fell 12% since the federal government removed property tax concessions for investors, making ANZ the fourth major Australian lender to flag a meaningful deterioration in housing lending demand. Across the major banks, mortgage applications have reportedly fallen between 12% and 20%. The coordinated pullback across the big four — ANZ, Commonwealth Bank, Westpac, and NAB — suggests the slowdown is structural rather than company-specific, and follows consecutive Reserve Bank of Australia rate hikes that have lifted borrower scrutiny and reduced credit availability.
Margins and Costs Support Earnings
ANZ's net interest margin increased one basis point to 1.54% during the quarter, while net interest income excluding markets rose 2% compared with the average quarterly result in the first half.
Costs fell 3% to $2.75 billion for the quarter, excluding a NZ$125 million class action settlement.
Bad Debts Well Below Expectations
ANZ recorded a $102 million bad debt charge, well below analyst forecasts of as much as $205 million. Non-performing loans remained stable despite three Australian interest rate increases this year.
Housing Market Headwinds
The decline in mortgage applications comes as Australia's housing market also loses momentum. Auction clearance rates are at six-year lows, and average property prices have declined approximately 2% over four months, according to Cotality.
ANZ said lending growth and modestly stronger margins supported the quarter, but housing demand has weakened following the changes to property investment tax concessions.
Capital Position and Market Reaction
The bank finished June with a common equity tier one ratio of 12.51%, providing a strong capital buffer. The combination of lower costs and subdued bad debts supported profitability.
The third-quarter result initially sent ANZ shares as much as 3.4% higher, outperforming the broader market.
ANZ's third-quarter result suggests the bank is managing the slowdown better than feared, but the sharp decline in mortgage applications indicates the housing market is becoming a more significant headwind for Australia's banking sector.
