ANZ's cash profits fall 42 per cent as it contact traces struggling borrowers

ANZ provided an update on its 95,000 home loan deferrals, reporting 42 per cent were still on initial deferral plans started after the pandemic took hold. Of the 55,000 borrowers whose initial deferral periods had expired, 20 per cent had requested a further deferral (half of those were from Victoria), 79 per cent had returned to full payments and 1 per cent had restructured or transferred to hardship payments.

ANZ's internal data revealed around 10 per cent of borrowers with deferred home loans were receiving JobKeeper or JobSeeker payments and 80 per cent now had stable or improved incomes.

Mr Elliott said many of the bank's customers behaved "like CFOs" by hoarding cash, bolstering rainy day funds and paying off the most expensive debt, with credit card lending down 18 per cent.

"To me, this says a lot about the rational and realistic approach customers are taking," Mr Elliott said.

"Customers who opted for deferrals were good customers, who up until COVID were making payments on time and many were ahead of schedule. From no fault of their own, they were stood down from their job, or their business was made illegal."

In the commercial loan segment, ANZ had 8000 customers on six-month deferrals – half of which were on government wage subsidies and 1600 had applied for payments to be deferred for a further four months. Around 40 per cent of customers who had applied for a second deferral had a savings buffer of 10 months or more. The hospitality and retail industries continued to be the most affected sectors, making up a combined 41 per cent of business loan deferrals, the bank said.

In line with industry trends, customer deposits climbed to $329 billion, compared to $295 billion in the same month last year, as people spent less money due to lock-down restrictions and the poor economic outlook. Institutional bank deposits grew to $223 billion from $217 billion in September last year.

Customers who opted for deferrals were good customers, who up until COVID were making payments on time and many were ahead of schedule. From no fault of their own, they were stood down from their job, or their business was made illegal.

ANZ CEO Shayne Elliott

Morningstar banking analyst Nathan Zaia said higher deposits would help ANZ with the cost of funding. "Given there are so many core deposits which are generally free or you pay very little for, it means you don't need to price as high in the term deposit market."

Mr Zaia also said ANZ's loan growth was pleasing, as it reported home loan accounts had grown by 51,000 accounts over the year to $61 billion, with 70 per cent from owner occupiers and 29 per cent from property investors. "They had a bit of a rough patch in the lending market where processing times blew out and that scars the mortgage brokers who want loans approved consistently.

"That has finally turned a corner, the momentum is better," Mr Zaia said.

The results come two days after ANZ had warned there would be a $528 million hit to cash profits after it had booked a growing remediation bill, accelerated software costs and writedowns across its Asian businesses.

ANZ provided more information on these "notable items" including impairments in its Malaysian bank, AMMB Holdings Berhad, and Indonesian bank, PT Bank Pan Indonesia. It saw a $77 million write-off in its Pacific business due to the impact of the pandemic.

"The impact of COVID-19 on the economies of the Pacific has been significant and conditions are expected to take some time to recover," it said.

Mr Zaia said overall the bank's profitability was "no worse than we expected".

Climate plan

ANZ also updated its climate policy on Thursday, pledging to no longer provide banking to any new business customer that makes more than 10 per cent of its revenue from thermal coal.

ANZ also committed to not providing direct finance to any new coal-fired power plants or thermal coal mines, including expansions, and said it would help existing customers that have more than 50 per cent exposure to thermal coal create a diversification plan. Existing lending to thermal coal companies would be phased out by 2030, it said.

Another feature of ANZ's climate policy was to only finance the construction of large-scale office buildings if they are highly energy efficient, it said.

Activist group Market Forces said ANZ's new policy meant that now no major Australian bank or insurer was "willing to back thermal coal beyond 2020, except for NAB" and called for exclusions to other fossil fuels.

Campaigner Jack Bertolus said ANZ ranked behind other big four banks in its commitments to oil and gas, with the Commonwealth Bank of Australia last year pledging to only provide banking to new oil, gas or metallurgical coal projects that were supported by environmental assessments and aligned with the goals of the Paris climate agreement.

"There is no room for expansion of the fossil fuel industry in a Paris-aligned decarbonisation pathway," Mr Bertolus said.

The bank's climate pledge comes as some of Australia's largest trading partners – China, Japan, Britain and South Korea – have committed to net-zero by 2050 targets, undermining the future viability of Australia's fossil fuel industry.

Resources Minister Keith Pitt called ANZ an "eco-warrior" and said it "should focus on home loans, not activism".

"At a time when the rest of Australia is focused on economic recovery and getting back to work, it is extraordinary that ANZ’s priority is to play environmental activist," he said.