ANZ margins hit as mortgage competition bites lender

ANZ shares fell 1.9% to $26.57 in afternoon trading.

Last year chief executive Shayne Elliott was forced to admit the bank had been caught off guard by ‘extremely high demand’ for home loans, as cheap credit, government stimulus and lockdowns have combined to create the perfect real estate storm.

Big banks have fought to reduce the ‘yes deadline’ to grow home loan portfolios as house prices across the country soar and profit margins are squeezed by historically high interest rates. low.

On Monday, ANZ said it had made “solid progress” in Australia to “improve simple home loan systems and processes with application times now in line with other major lenders”.

ANZ pointed to an uptick in the bank’s overall home loan balance in the first quarter of FY22, from $277.8 billion in September to $287 billion in December. However, he said more work was needed to improve processing times for complex home loans.

“Given the high levels of refinancing activity in the industry, managing both attrition and margins remains a key area of ​​focus,” ANZ said.

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Morningstar banking analyst Nathan Zaia said speeding up simple loan approvals is not enough and should be seen as the bare minimum in the hypercompetitive market, adding that all lenders will eventually be able to approve these types. loans within 24 hours.

“They have to be competitive at every level.”

Mr Zaia said ANZ had “probably annoyed a lot of brokers and a lot of customers for being too slow” last year, and should now introduce incentives to regain trust. “If you’ve just come back into a competitive endorsement period, you might have to use the price to win some people back.”

However, Zaia said all banks would have to balance the need to grow market share with maintaining a healthy approach to risk, with higher interest rates meant to exert additional pressure. on the ability of borrowers to repay their loans. “Only time will tell if we have a real economic downturn, how the loan books work out.”

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