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ANZ boss warns of tough economic year ahead, more customers to face financial difficulty
By Millie Muroi
ANZ boss Shayne Elliott has warned that next year will be tougher for the economy as interest rates and inflation remain high, and that more of the bank’s customers may fall into financial difficulty.
At the bank’s annual general meeting (AGM) on Thursday, Elliott said while the Australian and New Zealand economies remained “remarkably robust”, he expected economic growth to slow in 2024.
ANZ chief executive Shayne Elliott said the economic outlook for 2024 would be more challenging.Credit: Jamila Toderas
“The outlook is certainly more challenging, with interest rates and inflation expected to remain high, geopolitical risks rising and capital flows changing faster than we have seen in some time,” he said.
While the proportion of the bank’s borrowers, including first home owners, experiencing financial difficulty remained modest by historic standards, ANZ chair Paul O’Sullivan said financial hardship could increase in the year ahead as central banks continued to grapple with high inflation and many customers struggled with cost-of-living increases.
“We know many of our customers are feeling the financial pressure, and indeed some may find themselves in financial difficulty over the coming year,” he said.
On mortgages, Elliott said the bank would remain “competitive but not market leading” in its mortgage pricing as it looks to grow home loans.
“Lending growth remains strong across our Australia retail and commercial franchises in particular,” he said. “We want to grow our Australian home loan book profitably by continuing to offer reliable turnaround times, and in line with that we are competitive but not market-leading on pricing.”
Intense mortgage pricing competition over the past two years has eroded banks’ net interest margins – a measure of profitability that compares the banks’ funding costs with what they charge for loans. Despite this, ANZ, which has the smallest retail division including home loans of the big four banks, grew its home loans above industry levels, and Elliott said group revenue towards the end of the first quarter was tracking broadly in line with its performance in the second half of the 2023 financial year.
ANZ is rapidly moving towards a digital-first strategy, according to Elliott, with the bank last month launching digital home loans as part of its ANZ Plus offering, which he said reduced the time and cost of assessing, approving and settling loans.
“In only 18 months since launching, ANZ Plus has attracted almost $11 billion in deposits and around 550,000 customers, with more than 40 per cent new to ANZ,” he said.
Elliott said the group’s revenue was increasingly driven by its payments and currency processing businesses, which processes about 60 per cent of all money flowing into Australia and New Zealand.
“We facilitate an incredible $164 trillion in payments in, out, and around the markets in which we operate every year,” he said. “Most of that is cross-border payments, leveraging the strength of our international network.”
The AGM was briefly disrupted early in the proceedings by climate protestors dressed as clowns. Throughout the meeting, the bank was questioned about its climate policy, including its decision to continue lending to companies with intentions of expanding their fossil-fuel projects.
O’Sullivan said ANZ had been transparent about its relatively large oil and gas exposures, and that it made the bank’s role in the energy transition “all the more important”.
“We were also the first Australian bank to join the Net-Zero Banking Alliance and commit to transition our lending portfolio to net-zero financed emissions by 2050,” he said.
“This year we expanded these commitments to include 2030 pathways and targets for thermal coal and transport.”
O’Sullivan also addressed shareholder concern about his role as chair at Optus, which this year had a major outage.
“I apologise unreservedly to anybody who was affected by the outage,” he said. “I’m not really in the day-to-day chain of command at Optus, but clearly I have responsibilities. I’m not absolving myself of involvement.”
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