ANZ – Page 17 – Digital Finance Analytics (DFA) Blog

ANZ to launch new internet banking site

ANZ today announced a significant upgrade to its internet banking platform that will see it become the first major Australian bank to have a consistent user experience across desktop, tablet and mobile.

Launching this weekend, ANZ’s 2.1 million internet banking customers in Australia will be able to access the full suite of internet banking features from any device as well as improved security features.

ANZ Managing Director Products and Marketing, Matthew Boss said: “We know our customers are looking to do more of their banking via digital channels and we also know we need to continue to make banking as simple and secure as possible.”

“This upgrade complements our existing mobile banking application ANZ goMoney™ and allows customers to do more of their banking when and how they want with no instructions required.
“Given smartphones are expected to account for 90 per cent of all internet traffic by 2020, we’re pleased to be able to provide our customers with internet banking that is quick and simple to use on any device,” Mr Boss said.

Additional features of the Internet Banking upgrade include:

Ability for businesses to now approve payments on-the-go using mobile internet banking
Easy new menu navigation to help customers update contact details, pay a bill or open a new account
State-of-the-art visual design where accounts look like the actual card in the customers’ wallet.

ANZ has also strengthened the security of internet banking with the introduction of ANZ Shield, which authenticates transactions and activity using a one-time security code to allow customers to increase pay anyone limits or instantly reset their password.

ANZ to pay $13 million after failing to accurately apply bonus interest

ASIC says Australia and New Zealand Banking Group (ANZ) is compensating around 200,000 customers approximately $13 million after it failed to accurately apply bonus interest to Progress Saver Accounts (PSA) for a number of years. The refund payment includes an additional amount to recognise the time elapsed since the initial breach. ANZ reported this matter to ASIC under its breach reporting obligations in the Corporations Act.

PSA holders qualify for bonus interest payments in any particular month if they satisfy deposit and withdrawal requirements for that month. ANZ misaligned the monthly cycle it applied to determine whether a PSA holder was eligible for bonus interest payments and the monthly cycle it applied to calculate bonus interest payments. This issue was limited to PSA holders who made qualifying deposits or disqualifying withdrawals near the end of their monthly interest cycle, and did not impact the payment of bonus interest in other circumstances.

As a result, PSA holders may have made a qualifying deposit or disqualifying withdrawal on the last day of the previous monthly cycle while believing that it was the first day of a new monthly cycle.

ANZ discovered the breach following a customer complaint and reported it to ASIC. ANZ advised ASIC of its intention to undertake a thorough account reconstruction exercise to determine the financial impact on all affected PSA holders. The financial impact is dependent on what other transactions occurred in neighbouring monthly cycles.

ASIC Deputy Chairman Peter Kell said, ‘ANZ has taken its breach reporting obligations seriously in this matter. Breach reporting helps ASIC ensure affected consumers are returned to the position they would have held if it were not for the breach occurring at all.’

ASIC acknowledges the cooperative approach taken by ANZ to resolve this matter.

ANZ has issued letters to current PSA holders to clarify and update existing terms and conditions such as requirements and timing to qualify for bonus interest payments.

ANZ is contacting and providing refunds to affected past and present PSA holders, a process that should be completed by the end of this week.

ANZ 2015 Full Year Results Mixed Bag

ANZ has announced a statutory profit after tax of $7.5 billion up 3% and a cash profit of $7.2 billion up 1%. The second half profit was down on expectations. On a cash profit basis, income was $14.6 bn, up 4.8% on FY14, and expenses were $9,4bn, up 6.8% on FY14. In the second half of the year, revenue grew only 1.5% whilst expenses lifted 3.8%, and 2H provisions were also higher. Customer deposits grew 10% with net loans and advances up 9%. Return on Equity (RoE) was 14.0%. Overall net interest income grew 5.9%, (a mix of rising volumes +9.3%, and falling NIM -4.2%). Group net interest margin fell 2H14 of 212 basis points to 204 basis points, thanks to loan discounting and FX impacts, despite higher returns from deposits and improved funding mix. However, NIM was more stable in the second half.

Gross impaired assets decreased 6% over the course of the year. While the total provision charge increased to $1.2 billion or 22 bps, loss rates remain well under the long term average having risen from their historically low levels. However, second half provisions were higher. The individual provision charge declined $34 million and while the collective provision charge increased it remained low in absolute terms at $95 million compared to a net release the prior year. During FY15 the movement in the risk profile component of the charge reflected moderating economic activity with a lower number of credit downgrades being recorded whereas the prior year saw a higher level of upgrades.

Final Dividend 95 cents per share (cps) fully franked. Total Dividend for the year 181 cps up 2%. Earnings per share was flat at 260.3 cents, reflecting increased shares on issue following the capital raising in the second half.

At the end of FY15 the Group’s APRA CET1 ratio was 9.6%, up 87 basis points (bps) from March 2015. On an Internationally Comparable basis the CET1 ratio was 13.2%, placing ANZ within the top quartile of international peer banks. The completion of the sale of the Esanda Dealer Finance portfolio will deliver a further 20 bps of CET1.

ANZ raised a total of $4.4 billion of new equity throughout the past year, including $3.2 billion in response to APRA’s increased capital requirement for Australian residential mortgages which applies from July 2016. ANZ expects the APRA CET1 ratio to remain around 9% post implementing the mortgage RWA change next year. The Group continues to retain significant capital management flexibility to progressively adjust to further changes in regulatory capital requirements if required.

Segmentals

The Australia Division continued its trend of cash profit improvement with profit and PBP growth of 7%. The result was driven by growth in customer numbers (to 5.3 million) along with increased product sales and market share. Cash profit rose 7.2% and impaired assets fell from 0.43% in 2014 to 0.38% in 2015. However NIM fell 2 basis points. Investment focused on digital platform enhancement, increasing distribution sales capacity and capability, growing presence in particular in New South Wales (NSW), a high growth market where ANZ has historically been underweight, and building out specialist propositions in key sectors of Corporate and Commercial Banking (C&CB). Lending grew 9% with deposits up 5%. Sales performance has been strong, particularly in Home Lending, Credit Cards and Small Business Banking. ANZ has grown home lending market share consistently now for six years driven by capability and capacity improvements in branches, online, in ANZ’s mobile lender team and improved broker servicing. Home loans went from $209bn in 2014 to $231 in 2015.

Excluding non=performing loans, home loan delinquencies 90day+ sit at 0.63%, with higher rates in QLD and WA.

ANZ’s C&CB business grew lending by 6% despite patchy sentiment in the Commercial sector, with Small Business Banking performing particularly strongly, up 12%. Increased specialist capability saw lending to the Health sector up 16% in the second half. ANZ has seen strong commercial outcomes from its investment in digital capability with increased numbers of customers engaging with the business via digital channels. In FY15 sales via digital channels grew 30%, new to bank goMoney customers grew 89% and product purchases on mobile devices increased 121%.

International and Institutional Banking cash profit declined 1.6% from $2.7 bn in 2014 to $2.66 bn in 2015. NIM fell from 1.5% in 2014 to 1.34% in 2015. While it has been a challenging year for the business they continued to develop the customer franchises in Asia, New Zealand and Australia with particularly good outcomes in Asia. Customer sales in higher returning products demonstrated good growth with cash deposits up 11%, commodities sales up 44% and rates sales up 32%. Global Markets customer income continued a pattern of steady year on year (YOY) increases, up 7%. Despite a strong performance over the nine months to the end of the third quarter, changed financial market conditions in the last six weeks of the fourth quarter caused significant dislocation and a widening of credit spreads, which particularly impacted trading income as well as suppressing sales. This meant total Global Markets income finished the year down 2%. A multi-year investment in the high returning Transaction Banking Cash Management capability has seen Cash Management deposits up 48% over the past three years. Similarly investment in Global Markets product, technology and customer sales capability has driven good outcomes with Foreign Exchange income up 24% over the past three years to represent 42% of the book. IIB has been refining key business areas. Reduced exposure to some lower returning areas of the Trade business, while lowering Trade income slightly, has improved returns. In the Global Loans business, increased focus on RWA efficiency over the course of the second half saw profit decline but margins and returns on RWA begin to stabilise.

New Zealand Division cash profit grew 3% with PBP up 7%. NIM fell 1 basis point in the year. Ongoing business momentum is reflected in balance sheet growth which along with capital and cost discipline (costs +2%) has grown returns. While underlying credit quality remains robust and gross impaired assets continued to decline from 0.61% in 2014 to 0.35% in 2015, a lower level of provision write-backs YOY saw the provision charge normalising although remaining modest at $59 million. Lending grew 8% with deposits up 14%. Brand consideration remains the best of the top four banks, strengthening further. In turn, this is translating into lending demand with ANZ now the largest mortgage lender across all major cities. ANZ has grown market share in key categories during the year including mortgages, credit cards, household deposits, life insurance, KiwiSaver and business lending. The Commercial business grew strongly across all regions with lending up 8%. ANZ increased investment in digital and in sales capability. Sales revenue generated from digital channels increased 32%. A focus on delivering a great digital experience for customers has seen ANZ’s mobile banking app ‘goMoney’ consistently scoring above 98% in customer satisfaction and, with over half a million customers, it is the most downloaded banking app in New Zealand.

The Global Wealth Division increased profit by 11%. Positive performance was experienced across all business units. Insurance delivered growth in in-force premiums along with stable claims and lapse experience, which contributed to an 18% increase in both embedded value and in the value of new business. Private Wealth continued to deliver growth through customer focused investment solutions – with FUM increasing 22% and customer deposits 33% YOY. Global Wealth continues to reshape the customer experience through new digital solutions. Recent innovations include ‘Advice on Grow™’, new tools improving the advice experience, while ‘Insurance on Grow™’ will soon be released to the market. ANZ Smart Choice Super leads the industry in value for money and innovation. FUM now exceeds $4.3 billion and for the second year ANZ Smart Choice received the prestigious Super Ratings Fastest Mover award. ANZ KiwiSaver continues to build its market position with FUM growing 32% to A$7 billion. Global Wealth’s focus on improving customer experience is reflected in the increased sale of Wealth solutions through ANZ channels with growth of 8% YOY.

Overall contribution by region shows how reliant ANZ is on Australian net income.

Finally there was a clear emphasis on their strategy to drive digital channels, with considerable volume growth and focus, as well as efficiency. FTE declined 3%.

Esanda compensates consumers for conduct by finance broker

ASIC says that following an ASIC investigation of Get Approved Finance, a West Australian car finance provider, Esanda has agreed to compensate more than 70 borrowers for car loans organised by Get Approved Finance.

ASIC’s investigation found that between 2011 and 2014, over 15 brokers employed by Get Approved Finance engaged in unfair conduct by having Esanda approve loans for consumers with poor credit histories, who otherwise did not meet Esanda’s lending criteria. The brokers arranged for a friend or relative of the consumer to become the nominated borrower, instead of the consumer who was not eligible for credit. They did this by misleading the friend or relative about the effect of the documents they were signing, for example, by stating they were a guarantor rather than the borrower.

The Get Approved Finance brokers also sold add-on products (such as insurance or warranties), on behalf of various insurers, to some borrowers without their knowledge or consent. The additional premiums increased the amount borrowed and therefore the risk of borrowers defaulting. In one case, the consumer was sold add-on products costing more than $15,000, increasing the amount borrowed from around $24,000 to over $39,000.

The total value of the loans financed was more than $1.38 million, with some loans approved of over $50,000.

Get Approved Finance was able to earn commissions from both Esanda and the providers of the add-on products that would have been lost if Esanda had rejected the applications for credit. ASIC was concerned that Esanda did not have systems in place to manage the risks created by these commission payments or to effectively identify the serious misconduct by the Get Approved Finance brokers, given that it continued for over two years.

Esanda is a division of Australia and New Zealand Banking Group Ltd.

West Australian-based finance broker, Jeremy (WA) Pty Ltd, trades as Get Approved Finance.

…And ANZ Makes A Rate Hike Quorum

The last of the big four, ANZ has confirmed it will lift variable rates on owner occupied and investment home loans, effective 20 November.

The standard variable rate for owner-occupier home loans will increase by 0.18% to 5.56% whilst the standard variable rate for residential investment property loans will also increase by 0.18% to 5.83%.

Its the same story, ANZ also refers to rising regulatory capital requirements causing the rise.

“This decision reflects the significant additional cost of capital banks are now required to hold against home lending,” ANZ CEO Australia Mark Whelan said.

ANZ says the 18 basis point increase will add $36 per month to the average home loan of $242,000 and currently 42% of ANZ home loan customers are already at least one month ahead on their repayments.

Now, the fun begins – will the regionals tag along?

ANZ agrees to sell Esanda Dealer Finance portfolio to Macquarie

ANZ today announced it has entered into an agreement to sell its Esanda Dealer Finance portfolio to Macquarie Group Limited.

The portfolio includes net lending assets of $7.8 billion comprising retail point-of-sale auto finance of $6.2 billion, and wholesale bailment facilities and other Esanda branded finance offered to motor vehicle dealers of $1.6 billion (as at 31 August 2015). The total purchase price for the portfolio is $8.23 billion.

ANZ CEO Australia Mark Whelan said: “The sale of the Esanda Dealer Finance portfolio reflects a continued focus by ANZ on core businesses and further strengthens our capital position. “Macquarie’s expertise, scale and reach mean they are ideally placed to continue providing high levels of support to dealer and auto finance customers,” Mr Whelan said. Following completion, ANZ’s Common Equity Tier 1 ratio is expected to increase by ~20 basis points.

The sale does not include ANZ commercial broker, commercial asset finance or direct to consumer asset finance businesses.

The sale of the retail portfolio is expected to complete by 31 October 2015

Job Ads Jump in September – ANZ

Further more postive economic indicators. According to ANZ Research, Job advertisements jumped 3.9% m/m in September in seasonally adjusted terms after rising by a solid 1.3% m/m in August. In trend terms, job ads were up 1.0% m/m and growth since mid year now appears a little stronger than previously. The number of internet job ads grew 4.0% m/m in September following an increase of 1.3% m/m in August. Internet job ads were 13.7% higher than a year earlier. The number of newspaper job ads (2% of total job ads) declined 2.7% m/m in September, after rising for two consecutive months.

ACCC not to oppose Macquarie’s bid for Esanda

The Australian Competition and Consumer Commission has announced that it will not oppose Macquarie Group Limited’s (ASX:MQG) (Macquarie) bid for the Esanda Dealer Finance business (Esanda) from the Australian and New Zealand Banking Group (ASX: ANZ). Both Macquarie and Esanda provide motor vehicle finance to motor vehicle dealerships and consumers throughout Australia.

The ACCC concluded that the possible acquisition was not likely to substantially lessen competition in the market for the supply of bailment finance and point-of-sale (POS) finance facilities to motor vehicle dealerships.

“The ACCC had some concerns that the proposed acquisition may lead to increased bailment interest rates (or lower commissions to dealers on POS finance), particularly for dealerships that do not have access to an aligned or in-house finance provider,” ACCC Chairman Rod Sims said.

“However, the ACCC concluded that on balance the combination of existing and potential competitive constraints would be sufficient to prevent a substantial lessening of competition as a result of the possible acquisition. The merged entity will face competition from Westpac/St George and manufacturer-aligned financiers as well as the possibility of new entry, and pressure from vehicle manufacturers (OEMs) to ensure that their dealers’ finance offers remain competitive with those of other dealers.”

Several vehicle manufacturers in Australia have an aligned finance arm, including Toyota Finance, Nissan Finance, BMW Finance, VW Finance and Mercedes Finance. Although aligned financiers generally only offer wholesale finance to dealerships which sell vehicles of their manufacturer, the ACCC understands that most dealerships in Australia sell multiple brands of vehicles. Accordingly the proportion of dealerships without access to an aligned financier is small. Further, one of the aligned financiers, Alphera, competes for non-BMW dealerships despite being owned by BMW.

“The ACCC also noted that if the merged entity were to increase bailment rates and/or decrease POS commissions, this would provide an incentive for other providers, including manufacturer aligned financiers such as Toyota Finance and Nissan Finance, to begin to compete for the business of unaffiliated dealerships,” Mr Sims said.

The ACCC also considered that the competitive nature of car retailing may impose a further indirect competitive constraint on Macquarie. OEMs without their own finance arms (such as GM Holden, Ford and Mazda) need to ensure that their dealers remain competitive with other OEMs’ dealers. If they perceived that increased finance costs were affecting sales of their vehicles they would have an incentive to respond. OEMs already seek to ensure competitive finance options are available to their dealers by running tenders and appointing financiers to be the ‘white label’ finance provider to their dealerships. OEMs may also be able to use these tender processes to introduce another financier into the market.

Bailment finance is acquired by dealerships to finance the vehicles held in their showrooms before they are sold to customers. Dealerships also acquire POS finance facilities to enable them to offer finance to customers purchasing vehicles, and earn commissions on the customer finance contracts they arrange.

Economic Growth in Five Australian States Remains Below Average – ANZ

ANZ’s Stateometer, a new economic measure of Australia’s states and territories, showed economic growth in five Australian states was below trend in the year to June as Australian resource investment continues to decline. On the other hand, NSW and Victoria as the country’s top economic performers over the past year, led by strong residential investment, improving business and labour market conditions and pockets of strength in commercial property. Tasmania is close to its trend rate.

Tasmania and Queensland share similar characteristics to the stronger states including solid housing and private consumption and are also benefiting from the depreciating Australian dollar. ANZ says they expect their below-trend lower momentum position on the ANZ Stateometer will change as these drivers lead to recovery rather than further deterioration.

Western Australia (WA) and SA are experiencing downward momentum caused by WA’s ongoing mining consolidation and SA’s weakening industrial sector.

Economic activity increased in the Northern Territory due to recent improvements in its labour market. However it is expected to remain well below its growth trend rate due to a likely ongoing decline in overall business investment.

The ACT increased its momentum significantly but its performance has been well below its trend rate since Commonwealth budget tightening began around 2011.

They conclude that with strong inter-linkages between NSW and Victoria and the rest of the country, the weight of the resources downturn does present a downside risks to these economies. The backdrop of falling commodity prices and unsettled financial markets are also downside risks.