Looking at our half year result, it’s hard for the numbers to tell the full story, so we asked ANZ NZ CFO Stewart Taylor to explain in a little more detail.
How well ANZ NZ does is a reflection of the financial well-being of our customers and the economy in which we operate.
You will have seen the headline numbers:
- Statutory net profit after tax (NPAT) of NZ$789 million, a 15% decrease on the corresponding half in the 2019 financial year.
- Our credit impairment charge increased by $200m (to $232m) as we factor in the expected impact of the economic downturn on our customers
- Good balance sheet growth with customer deposits and gross lending up, 5% and 3% respectively.
Stepping back, the areas that I would highlight are:
1) Revenue is flat compared to last year’s corresponding half as the benefit of volume growth has been largely offset by a decline in our net interest margin (NIM) due to a lower interest rate environment,
2) costs have increased as we are delivering a number of key regulatory and compliance programmes, and
3) our credit impairment charges have increased as highlighted above.
The impact of COVID-19
While I’m encouraged by the way New Zealand has dealt with the COVID-19 pandemic, and the gains we’ve made quickly containing the virus, COVID-19 is likely to have a material impact on economic activity in the short term and there is plenty of uncertainty around the speed and shape of the recovery.
What happens in the economy will eventually manifest itself in our results as credit provisions.
Looking to the future
It is hard to imagine a scenario where we don’t see an increase in credit losses, businesses have been shut, borders are closed and people haven’t been spending as much money.
However, we are well placed to deal with this. The home loan portfolio is well secured and we have taken a very thorough and risk-based approach to our lending to business and agri.
ANZ is a strong well capitalised business
As at 31 March 2020 we have a total capital ratio of 13.9%, up from 13.6% as at 30 September 2019. This means that we are well placed to support New Zealand through the economic recovery.
We’ve been through a period since the Global Financial Crisis where we have seen a steady reduction in credit losses. A benefit of being well capitalised is that is that when there is a downturn we’ve got resilience in our business to absorb an increase in those losses.