ANZ has unveiled a first-half cash profit of about $3.4 billion in a result up more than 20 per cent on last year’s writedown-heavy $2.8 billion.
The bank leads a string of reports by Australia’s major finance houses over the coming week, with investors and analysts expecting a solid round of earnings and searching for clues about what lies ahead.
ANZ’s improvement is thanks to a strong performance by its retail unit, tight cost control and a sharp drop in bad and doubtful debt charges already flagged in its first-quarter trading update.
The news of the mega profit comes just a day after the bank confirmed it would increase interest rates on both owner occupier and investor home loans.
National Australia Bank and Westpac are also expected to announce larger profits over the coming days but, with financial stocks having gained more than 20 per cent in the past six months, the market appears to have already priced that in.
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The results will be the first since the Australian Prudential Regulatory Authority introduced new restrictions on the amount banks can lend in the form of interest-only loans.
Banks lifted interest-only and investor rates as a result of APRA’s intervention and, while that could have a positive impact in the second half, banks could face earnings pressure in the longer term if the moves successfully reduce home loan demand from investors.
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UBS banking analyst Jon Mott says that, while the banks have enjoyed a purple patch over the past six months, APRA’s limit on interest-only lending and hints of further increases to housing risk weights will have a bigger impact than many expect.
“The impact of this is likely to be decelerating credit growth to low single digit levels in FY18/19,” Mr Mott wrote in a note.
“Additional mortgage repricing is highly likely.”