ANZ has released its Pillar 3 disclosure for the quarter ending December 31, 2021. The report highlights several financial metrics and strategic decisions in light of uncertain trading conditions and a potential Capital Notes offer.
The Group Net Interest Margin (NIM) decreased by eight basis points for the quarter, with an underlying NIM reduction of five basis points. This decline was primarily due to a lower exit rate at the full year compared to the second half average, alongside ongoing structural challenges in the sector. ANZ anticipates that rising rates, particularly in New Zealand, and recent changes in deposit pricing will moderate these headwinds in the upcoming quarter.
In Australia, ANZ has made strides in improving systems and processes for simple home loans, aligning application times with other major lenders. However, efforts are ongoing to enhance response times for more complex loan applications. The Australian Home Loans balance sheet saw slight growth in the first quarter of FY22. With high refinancing activity within the sector, managing attrition and margins remains a priority.
ANZ's Markets business experienced softer revenue in October due to trading conditions. While subsequent months aligned more closely with FY21 revenue trends, this initial softness is expected to impact First Half performance.
From March 2022, ANZ will implement changes to packages offered within its Australian Retail & Commercial business. These adjustments aim to provide customers with simpler and lower fee options but are projected to negatively affect other operating income by approximately $140 million across FY22.
Operating costs are expected to remain stable in the first half while investment spending increases as ANZ accelerates business investments, particularly within Australia Retail and Commercial and ANZx. Investment expenses have also risen compared to FY21.
Credit quality remained stable with a total provision release of $44 million during the quarter. This includes a collective provision release of $122 million offset by an individually assessed provision of $78 million.
The Group’s Common Equity Tier One ratio stands at 11.65%, factoring in the final dividend and solid credit growth within Institutional sectors. Since announcing a $1.5 billion On Market Buy Back in July 2021, ANZ has repurchased $1.015 billion worth of Ordinary Shares as of January 31, 2022.
ANZ's capital position offers flexibility for further capital returns to shareholders. The bank is considering increasing its current on-market buy-back size while balancing capital efficiency against maintaining a robust balance sheet amid ongoing economic monitoring.