Housing Slump and Misconduct Charges Crunch ANZ’s Profit

(Bloomberg) -- The cost of cleaning up from years of bad behavior and a slowing housing market have crunched earnings at Australia & New Zealand Banking Group Ltd.

  • Cash profit at Australia’s third-biggest lender by market value fell 16 percent to A$5.81 billion ($4.1 billion) in the 12 months ended Sept. 30.

Key Insights

  • With the big-four banks suffering the spreading fallout from an inquiry into misconduct in the financial industry and the end of the property boom, ANZ Bank’s subdued results set a gloomy tone for the rest of earnings season. Chief Executive Officer Shayne Elliott said he expects the tough environment to continue for “the foreseeable future.”
  • ANZ is getting out of the riskier end of home lending, with 70 percent of new mortgages now going to owner-occupiers rather than property investors. This means the bank “sacrificed short-term revenue growth and higher margins in Australia, particularly in the investor and interest-only segments,” Elliott said. “It was the right thing to do.”
  • In a sign the golden years of easy money for Australia’s banks are over, ANZ’s return on equity, a key measure of profitability, plunged 67 basis points to 11 percent
  • The Melbourne-based lender’s retreat from Asia and sale of its life unit has made it a much smaller, more domestic-focused bank. Earnings from continuing operations fell 5 percent to A$6.49 billion from the previous year.

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  • For more details on the results, click here

Market Reaction

  • While shares of the big-four banks have been hammered this year, ANZ has fallen the least, as A$1.9 billion of buybacks from a A$3 billion program helped limit the damage. The stock has fallen 11 percent this year, while shares of its three main rivals are down about 15 percent.
Housing Slump and Misconduct Charges Crunch ANZ’s Profit