Tag: ANZ

ANZ NZ CEO Quits

ANZ NZ says David Hisco, its CEO of almost 9 years, is leaving due to ‘ongoing health issues’ and ‘the characterisation of certain transactions following an internal review of personal expenses’

This follows the Reserve Banks’ censure of their operations, as we reported recently.

NZ Reserve Bank censures ANZ

According to a report in interest.co.nz, ANZ NZ is comfortably New Zealand’s biggest bank. As of March 31, it had total assets of $164.952 billion, total liabilities of $153.224 billion, and gross loans of $132.275 billion. Last year the bank’s annual profit was a shade under $2 billion.

The report says David Hisco, ANZ New Zealand’s CEO since 2010, is leaving the bank under a cloud.

In a statement ANZ says Hisco’s departure follows “ongoing health issues as well as Board concern about the characterisation of certain transactions following an internal review of personal expenses.”

“ANZ today confirmed the appointment of Antonia Watson as Acting CEO of ANZ New Zealand, following the departure of David Hisco,” ANZ says.

“While Mr Hisco does not accept all of the concerns raised by the Board, he accepts accountability given his leadership position and agrees the characterisation of the expenses falls short of the standards required.”

ANZ New Zealand Chairman John Key says it’s disappointing Hisco is leaving ANZ under such circumstances after such a long career, his departure is “the right one in these circumstances given the expectations we have of all our people, no matter how senior or junior.”

Monday’s announcement comes after ANZ NZ announced in late May that Hisco had taken extended sick leave with Antonia Watson, the bank’s managing director for retail and business banking, stepping in as acting CEO.

“We are fortunate to have an experienced executive in Antonia Watson to step in while we conduct a search for a replacement. Antonia’s extensive banking career has her well placed to help ANZ manage through this transition,” Key says.

“Mr Hisco will receive his contracted and statutory entitlements to notice and untaken leave, with all unvested equity to forfeit. The Reserve Bank of New Zealand and Australian Prudential Regulation Authority have been notified of the changes and are being provided all requisite filings.”

Key and Watson will hold a press conference later on Monday morning.

ANZ’s 2018 annual report shows (page 54-55) that in the year to September 2018 Hisco was on a A$1,170,703 fixed salary. On top of this he received A$644,397 in cash as ‘variable remuneration’ and A$864,274 of ‘deferred variable remuneration’, which vested during the year, giving a total remuneration received during the year of A$2,679,384. Hisco was paid in New Zealand dollars, with the amounts converted into Australian dollars.

Hisco’s appointment as ANZ NZ CEO was announced in September 2010, with him succeeding Jenny Fagg. An Australian, he had previously been managing director of ANZ NZ subsidiary UDC Finance between 1998 and 2000. Hisco, 55, has also been a member of Australian parent the ANZ Banking Group’s group executive committee with responsibility for Asia wealth, Pacific, and international retail.

An undoubted high-point of Hisco’s time as CEO of ANZ NZ was the successful culling of the National Bank brand, and movingANZ onto National Bank’s core ‘Systematics’ banking platform in 2012. The two moves effectively unified the two banks nine years after the ANZ Banking Group bought the National Bank from Britain’s Lloyds TSB for A$4.915 billionplus a dividend of NZ$575 million paid from National Bank’s retained earnings.

ANZ Complies With ASIC Court Enforceable Undertaking

ASIC says:

Australia and New Zealand Banking Group Limited (ANZ) has complied with the Court Enforceable Undertaking (CEU) entered into with ASIC in March 2018 regarding ANZ’s fees for no service conduct for its Prime Access service.

On 31 May 2019, ASIC received an audited attestation from ANZ signed by Mr Michael Norfolk, Managing Director Private Banking and Advice, and an independent expert report from Ernst & Young (EY).

ASIC is satisfied with the audited attestation and the independent expert report. Compliance with the obligations under the CEU is now finalised, save for the payment of some remaining refunds due to clients, to be completed by mid-July 2019.

ANZ has attested to the following as required under the CEU:

  1. the changes to ANZ’s systems, controls and processes that have been implemented in response to the fees for no service conduct;
  2. subject to (c), that ANZ has provided documented annual reviews to Prime Access customers who were entitled to such reviews in the period from January 2014 to March 2018;
  3. in the 1,410 instances where documented annual reviews were found to have not been provided, ANZ is in the process of refunding those customers (with remediation expected to be complete by mid-July 2019); and
  4. that ANZ now has systems, controls and processes that seek to ensure documented annual reviews are being provided, and that instances of non-delivery are detected and remediated.

ASIC is aware that ANZ has announced it will no longer offer the Prime Access service to new customers and will phase it out for current customers over the next 18 months. ASIC will monitor the phasing out of Prime Access.

ANZ Job Ads Down In May

ANZ says their Australian Job Ads plummeted in May, but recovered strongly in the last week of the month, indicating much of the decline for the month as a whole was due to the April ‘holiday year effect’ and the timing of the election.

In seasonally adjusted terms, job ads fell 8.4% m/m and 14.9% y/y. This is
the weakest monthly result since Jan-2010 and the steepest annual fall since 2013. In trend terms, job ads fell 1.8% m/m and 10.1% y/y.

There is an alignment it seems between the employment growth and ANZ job ads growth.

NZ Reserve Bank censures ANZ

The Reserve Bank has revoked ANZ Bank New Zealand Limited’s (ANZ) accreditation to model its own operational risk capital requirement due to a persistent failure in its controls and attestation process.

ANZ is now required to use the standardised approach for calculating appropriate operational risk capital. From March 2019, this will increase its minimum capital held for operational risk by around 60%, to $760 million.

The Reserve Bank requires banks to maintain a minimum amount of capital, which is determined relative to the risk of each bank’s business. The way that risk is measured is important for ensuring that each bank has an appropriate level of capital to absorb large and unexpected losses.

“Accreditation is earned through maintaining high risk management standards, and comes with stringent responsibilities for the bank’s directors and management,” says Deputy Governor Geoff Bascand.

“The Reserve Bank’s role is to review and approve internal models. The onus is then on bank directors to ensure, and attest, that their bank is compliant with the Reserve Bank’s regulatory requirements. To do that, bank directors need to be satisfied that the internal assurance processes that sit behind the attestations are being adhered to.

“ANZ’s directors have attested to compliance despite the approved model not being used since 2014. The fact that this issue was not identified for so long highlights a persistent weakness with ANZ’s assurance process.”

The Reserve Bank had encouraged ANZ to undertake a full review of its attestation process, and assess its compliance with capital regulations, Mr Bascand says.  ANZ’s failure to use an approved model was revealed through that review.

“A bank’s disclosure statement is required to contain certain statements signed by each director of the bank. These must state, among other things: whether the bank has systems in place to monitor and control adequately the banking group’s material risks and whether those systems are being properly applied; and whether the bank has complied with its conditions of registration over the period covered by the disclosure statement.

“These directors’ attestations are important because they strengthen the incentives for directors to oversee, and take ultimate responsibility for, the sound management of their bank.

“We continue to work with ANZ in assessing its systems controls before determining any further action.” 

ANZ is one of four big banks in New Zealand that are accredited by the Reserve Bank to use their own risk models – the internal models approach – in calculating their regulatory capital requirements.

The Reserve Bank is currently consulting on its capital framework for banks. Among the many decisions to be made, and in part due to proven weaknesses with the internal models approach, it is proposing that all banks adopt a new standardised approach for calculating operational risk capital.

Note to editors:

Attestation regime

A bank’s disclosure statement is required to contain certain statements signed by each director of the bank. These must state, among other things: whether the bank has systems in place to monitor and control adequately the banking group’s material risks and whether those systems are being properly applied; and whether the bank has complied with its conditions of registration over the period covered by the disclosure statement.

These directors’ attestations are important because they strengthen the incentives for directors to oversee, and take ultimate responsibility for, the sound management of their bank.

What are capital requirements?

Bank capital is a source of funding that banks use that stand first in line to absorb financial losses they might make. The Reserve Bank, like other regulators around the world, sets the minimum level of capital a bank must use to fund its operations. The more capital a bank has, the less likely it is to fail.

There are three broad types of risks that banks are required to have capital for:

Credit risk – the risk that borrowers will be unable to pay back their loans

Market risk – the risk that a change in market conditions, such as changes in the exchange rate, will cause losses for banks

Operational risk – other risks that relate largely to the systems of a bank, such as a computer systems failure

What is internal modelling?

Locally incorporated banks in New Zealand can calculate their capital requirements in two ways: the internal models approach or the standardised approach.

Under the internal models approach a bank is able to use statistical models to assess the riskiness of its business such as the risk of its mortgage loans, or its level of operational risk. The bank’s internal models need to be approved by the Reserve Bank to ensure they are conservatively designed. Banks also need to meet several qualitative criteria to use this approach, such as proper governance and validation of these internal models. The banks in New Zealand that are accredited to use the internal models approach are ANZ, ASB, BNZ, and Westpac.

Under the standardised approach, the amount of capital that is required is prescribed in a set of formulae by the Reserve Bank.  This approach is simpler for banks to use than the internal models approach and easier to implement.

What is an operational risk model?

Operational risk capital requirements are designed to provide banks with sufficient capacity to absorb a wide range and magnitude of operational risk-related losses (from, for example: inadequate or failed internal processes, people or systems; or from external events, including legal risks). Underestimation of the amount of operational risk capital that a bank needs can undermine a bank’s financial soundness and could make it more likely to fail.

What is the Capital Review?

The Capital Review is a review of the capital requirements that the Reserve Bank sets for locally incorporated banks. It seeks to address several questions about New Zealand’s current framework: What should New Zealand’s risk tolerance be for banking crises? Do banks have sufficient levels of capital? What should the quality of capital be in New Zealand? Should we allow internal modelling for capital requirements? Should there be a significant difference between internal modelling and standardised approaches?

As part of its current Capital Review, the Reserve Bank is reviewing its capital framework for banks. Due in part to proven weaknesses with the internal models approach and in line with moves by other supervisor banks around the world, the review proposes that all banks adopt a new standardised approach for calculating operational risk capital.

More Rate Cuts For New Mortgages

From The Adviser.

ANZ and Macquarie Bank have reduced their home loan rates by up to 60bps, with changes across both lenders effective from 10 May.

For its Breakfree discount package, ANZ has announced the following rate changes for owner-occupiers:

  • three-year owner-occupied principal and interest rates have been cut by 30bps to 3.69 per cent (4.94 per cent comparison rate)
  • five-year owner-occupied principal and interest rates have been cut by 20bps to 3.99 per cent (4.89 per cent comparison rate)
  • two-year owner-occupied interest-only rates have been cut by 20bps to 4.29 per cent (5.13 per cent comparison rate)
  • three-year owner-occupied interest-only rates have been cut by 60bps to 3.99 per cent (5.00 per cent comparison rate)
  • five-year owner-occupied interest-only rates have been cut by 59bps to 4.50 per cent (5.07 per cent comparison rate)

ANZ has also made the following changes for Breakfree investment loans:

  • two-year investment principal and interest rates have been cut by 6bps to 3.89 per cent (5.54 per cent comparison rate)
  • three-year investment principal and interest rates have been cut by 20bps to 3.99 per cent (5.44 per cent comparison rate)
  • five-year investment principal and interest rates have been cut by 26bps to 4.19 per cent (5.31 per cent comparison rate)
  • three-year investment interest-only rates have been cut by 30bps to 4.19 per cent (5.48 per cent comparison rate)
  • five-year investment interest-only rates have been cut by 4bps to 4.95 per cent (5.60 per cent comparison rate)

Meanwhile, Macquarie Bank has reduced variable and fixed mortgage rates by up to 51bps across its Basic and Offset packages.

The non-major’s variable rate changes are as follows:

  • cuts of between 7-21bps for variable home loans for owner-occupiers paying principal and interest and interest only, excluding loans with an LVR of less than 95 per cent
  • cuts of between 11-51bps for variable home loans for investors paying principal and interest and interest only, excluding loans with an LVR of less than 90 per cent

Macquarie’s fixed rate changes include:

  • cuts of between 10-20bps for one, two and three-year fixed rates for owner-occupiers paying principal and interest
  • a cut of 10bps for one-year fixed home loans for owner-occupiers paying interest only
  • a cut of 10bps for one-year fixed home loans for investors paying principal and interest
  • cuts of between 10-15bps for one, two and three-year fixed home loans for investors paying interest only

ANZ and Macquarie are among several lenders that have reduced rates across their fixed rate home loans over the past few months.  

Reflecting on the changes, comparison website Canstar’s finance analyst, Steve Mickenbecker, said lenders are preempting an expected cut to the official cash rate from the Reserve Bank of Australia (RBA).  

“Rate changes are running rife this week,” he said. “Macquarie and ANZ are joining the group of lenders reducing home loan rates ahead of the Reserve Bank curve.”

Mr Mickenbecker added: “The banks are anticipating an official cut to the cash rate in the coming months and are not waiting on the Reserve Bank to move.

“They are instead using this period to sharpen the pricing pencil to attract new business.”

However, the analyst noted that existing borrowers would need to wait for a cash rate adjustment before they too receive lower mortgage rates.

The RBA was expected to drop the official cash rate for the first time since August 2016 when its monetary policy board meeting was held last week.

However, the central bank opted to hold the cash rate at 1.5 per cent, with some analysts, including AMP Capital chief economist Shane Oliver, attributing the RBA’s decision to the current political environment, with the federal election looming.

Mr Oliver added that AMP has “pencilled in” a rate cut in June to offset the continued weakness in the housing market, flat inflation and slow economic growth.

ANZ Raises Concerns About Mortgage Stress

From the ABC.

On Radio Nation PM Programme this evening.

It was just weeks ago that mention of rising mortgage defaults was met with some sniggers and jeers, with many in the industry pointing to what are still actually very low rates of arrears overall.

So you can imagine the surprise when the boss of one of Australia’s big four banks conceded today that he too was worried about home owners keeping up with their repayments.

If that’s not scary enough, according to the ANZ, as many as 5 per cent of homes slumped into negative equity in March, where the value of what they owe the bank is more than what their home is worth, putting even more pressure on borrowers.

It begs the question: is the worst of the house price falls now over, or is there worse to come?

I discuss the latest data.

ANZ 1H19 Result Points To Subdued Credit Growth, Intense Competition And Increased Compliance Costs

ANZ reported their 1H19 results today. Their “shrink to greatness strategy” did work to an extent, but their results were flattered by higher than expected Institutional performance, which offset the pressure on the Australian retail bank from lower mortgage growth and margins, and higher customer remediation costs. They are well capitalised, which is a good thing, given the higher and building mortgage delinquency. They foresee tough times ahead. Tricky times to be a banker.

The results are also muddied by the many business exits and restatements and a significant reduction in staff. But among the big four, they are probably the best placed, but will be hit if mortgage delinquency continues to rise (as we suspect they will) as the Australian economy stalls.

They announced a Statutory Profit after tax for the Half Year ended 31 March 2019 of $3.17 billion, down 5% on the prior comparable period.

Cash Profit for its continuing operations was $3.56 billion, up 2%. The return on equity was 12% compared with 11.9% 1H18, while the return on average assets fell 2 basis points from 0.79% in 1H18 to 0.77% 1H19.

Institutional delivered a higher than expected income (but that may not be sustainable), while other sectors were under more pressure. Institutional profit was up 33%.

Slower credit demand put pressure on the retail bank, through lower volume growth and reduced fee income. Australian revenue was down 6% as home loan repricing benefit was more than offset by higher funding, increased competition, discounts and regulatory changes.

Net interest margin (continuing operations), dropped 2 basis points from 2H18, impacted by funding and asset mix, and markets. Customer remediation added 2 basis points, weirdly. Management, in their briefing said that underlying NIM pressures will persist into 2H19.

ANZ’s programme of asset sales and restructure benefited the business, and staff (FTE) fell 5% from 41,580 1H18 to 39,359 1H19. Costs were cut as a result, reducing the cost of running the bank by approximately $300 million and they absorbed ~$550m inflation.

However the customer remediation programme is up to $926m ($657m post tax) since 1H17, $698m on Balance Sheet at 31 March 2019. They are currently resolving issues with more than 2.6m customers across retail a commercial lines.

The total provision charge for the half was $393 million, down 4% from this time last year. The Group Loss rate decreased marginally to 13bps for the half (from 14bps in the first half of 2018). New Impaired assets declined to $890 million, down 8% compared to this time last year with Gross Impaired Assets broadly flat over the same period.

Australian gross impairments have rise from a low of March 2018, offset by lower provisions from Institutional.

Mortgage arrears in Australia rose quite significantly, despite below system mortgage growth by ANZ. In their briefing, ANZ said its Australian mortgage book will shrink further 2H19, because their strategies which are aimed at improving momentum in this business will take time to flow through.

30 day and 90 delinquencies (missed payments) are rising, with property investors higher than owner occupied borrowers. 90+ day past due is at 100 basis point compared with 89 basis points prior, as well as the hike in 30+ day past due.

WA delinquency comprise 30% of 90 day plus delinquency, despite being just 13% of the portfolio, and 65% of losses come from WA. Whereas NSW/ACT makes up 32% of the portfolio but 23% of 90 day plus past due.

The NSW “dynamic LVR” includes 8.2% of loans above 90% (but note they say “valuations updated to February 2019 where available”, so this is understated in my view – what share of the portfolio is marked to market?. Given falling prices in NSW, more loans will drop into negative equity. And remember this is LOANS not HOUSEHOLDS. Losses in Australian mortgages housing was 4 basis points in 1H19, up from 2 basis points prior.

In the briefing, they attributed the rise in mortgage delinquencies to:

  • the shift from interest-only to principal and interest loans, demanding higher repayments
  • subdued wage growth putting more financial pressure on households
  • the trend in falling house prices
  • a longer cure time-frame, as delinquencies are now taking a longer time to cure thanks to extended property sale time-frames
  • the “denominator effect” of lower loan growth and shrinking mortgage book

None of this is going to change anytime soon.

Switching from IO to PI will continue.

ANZ’s Common Equity Tier 1 Capital Ratio increased to 11.5%, up 45 basis points (bps). Return on Equity increased 13 bps to 12.0% with Cash Earnings per Share up 5% to 124.8 cents.

The Group’s funding and liquidity position remained strong with the Liquidity Coverage Ratio at 137% and Net Stable Funding Ratio at 115%.

The Interim Dividend is 80 cents per share, fully franked. This equates to $2.27 billion to be paid to shareholders. The 3.7% reduction in shares due to the completion of the $3 billion buy-back assisted.

The CEO said :

Retail banking in Australia will remain under pressure for the foreseeable future with subdued credit growth, intense competition and increased compliance costs impacting earnings.

“New Zealand is performing well, however it is starting to share similar characteristics with the Australian market due to strong competition and a slowing Auckland housing market. The major concern in New Zealand remains the impact of the proposed capital changes on the broader economy.

“Institutional banking is performing well and positioned to provide positive earnings diversification, which will partially offset the headwinds in other parts of the Group

Credit squeeze is supply-driven, says Elliott

ANZ CEO Shayne Elliott has told a parliamentary inquiry that banks triggered the credit downturn impacting the supply of housing finance, via InvestorDaily.

Softening conditions in the credit and housing space has sparked debate among market analysts regarding the cause of the downturn, with some stakeholders, including governor of the Reserve Bank of Australia (RBA) Phillip Lowe claiming that the “main story” of the downturn is one of “reduced demand for credit, rather than reduced supply”.

Mr Lowe claimed that falling property prices have deterred borrowers, particularly investors, from seeking credit.

According to the Australian Prudential Regulation Authority’s latest residential property exposure statistics for authorised deposit-taking institutions, new home lending volumes fell by $25.1 billion (6.5 per cent) over the year to 31 December 2018. The decline was driven by a sharp reduction in new investment lending, which dropped by $17.7 billion (14 per cent), from $126.9 billion to $109.2 billion over the same period.

However, the ANZ CEO has told the House of Representatives’ standing committee on economics that he believes the downturn in the credit space has been primarily driven by the tightening of lending standards by lenders off the back of scrutiny from regulators and from the banking royal commission.  

Liberal MP and chair of the committee Tim Wilson asked: “Is the reported credit squeeze more demand-driven by borrowers pulling back or supply-driven by banks being more conservative?”

To which Mr Elliott responded: “This is a significant question that’s alive today, and there are multiple views on it. I can’t portion between those two. 

“I’m probably more in the camp that says conservatism and interpretation of our responsible lending obligations and others has caused a fundamental change in our processes, and that has led to a tightening of credit availability.

“It’s a little bit ‘chicken and egg’,” Mr Elliott added. “If people find it a little bit harder to get credit, they might step back from wanting to invest in their business or buy a home, so I think they’re highly correlated, but I do think banks’ risk appetite has had a significant impact.” 

Mr Elliott said that “vagueness and greyness” regarding what’s “reasonable” and “not unsuitable” as part of the responsible lending test have left the law to the interpretation of lenders.

“Unfortunately, we haven’t always had the benefit of a significant amount of precedence or court rulings on some of those definitions, so we’ve done our best,” he said.

“I think the processes recently, the questions that this committee has asked, the questions in the royal commission, have started a debate, not just with the regulators but with the community about what is the real definition of [responsible] lending.” 

He added: “As a result of that, we’ve become more conservative in our interpretation, and so we’ve tightened up, [and some] Australians will find it a little bit harder to either get credit or get the amount of credit that they would have otherwise had in the past or would like.

“I’m not suggesting for a minute that it’s wrong, it’s just the reality.”

ANZ’s IO Loan Changes Have Risk Written All Over

ANZ have announced a new flavour of interest only loans.  They said that from 25th March 2019 they will increase the maximum Loan to Value Ratio of Interest Only Loans from 80% to 90%, and increase the maximum term from 5 years to 10 years.

These loans will be marketed only for high-income professionals with stable jobs. And timing means people could transact before the election in May (probably) and so lock in tax benefits relating to negative gearing, which Labor are going to remove for existing property purchased after a certain data, TBA.

ANZ says their response to APRA’s responsible Lending guidelines from 2017 was to manage down the growth of IO loans. But they have decided to increase their focus on the investor market, wiliest ensuring they remain in line with  the APRA requirements.

Just to remind ANZ, the key APRA points are :

  1. Take 80% of rental streams as income to allow for vacancy rates
  2. Assess the risk on a principal and interest rate loan basis
  3. Ensure the borrower has firm plans to repay the capital
  4. Ensure adequate validation of income and expenditure
  5. Ignore any tax breaks or benefits, so asses on a pre-tax basis.

ANZ says these changes will apply to new loans, either fixed or variable interest rate.

The LVR limit is inclusive of the Lenders Mortgage Insurance Premium

For Owner Occupier Home Loan products: Interest Only term cannot exceed a maximum 5 years per application OR 5 years in total since the last full credit critical application.

For Residential Investment Home Loan products: Interest Only term cannot exceed a maximum 10 years per application OR 10 years in total since the last full credit critical application.

For servicing, the customer is assessed based on their ability to repay the loan over 20 years P&I.  And we understand these new loans are assessed at a minimum floor rate of 8.25%, which is a very high hurdle to cross.

These are not available to Owner Occupied Borrowers.

Two comments, first this is to be expected, as ANZ has seen their mortgage portfolio growth drop away, and they are desperate to write business. They are trying to target a specific customer segment, and some who are currently facing a loan reset may be rescued.

But then, our modelling suggests only a very small cohort who might be eligible, and we expect other lenders to react, so they will lift competition for that small segment.

Talking of reaction, we think APRA should step in to ban loans of this duration, but they probably won’t, and the RBA might even welcome the move behind the scenes as generating a rise in credit.

But frankly, this is just one more of those unnatural acts I keep talking about from actors who are trying to keep the property bubble alive. But potential investors should realise that prices are likely to keep falling, rental streams are diminishing, especially in Sydney, and a repayment plan over 20 years, will require higher monthly repayments down the track. This has high risk written all over it!

ANZ ” to prudently increase volumes in the investor space”

ANZ today released its scheduled APRA APS330 report covering the quarter to 31 December 2018. Credit Quality remains stable with a Provision Charge of $156 million tracking below the FY2018 quarterly average.

The Group loss rate was 10 basis points1 (14 bps 1Q18). Group Common Equity Tier 1 (CET1) was 11.3% at the end of the quarter.Consistent with usual practice, ANZ also released a chart pack to accompany the Pillar 3 disclosure.

The chart pack once again includes an update on Australian housing mortgage flows and credit quality. Australia home loan system growth was 4.2%2 in the 12 months to end December 2018. ANZ’s Australian home loan portfolio grew 1.0% ($2.7 billion) in the same period with the Owner Occupier portfolio up 3.5% ($6.1billion) and the Investor portfolio down 3.8% ($3.2 billion). In the 12 months to the end of January 2019, ANZ’s home loan portfolio grew 0.4%.

ANZ’s home lending growth trends are attributable to lower system growth, ANZ’s preference for Owner Occupier/Principal and Interest lending which drives faster amortisation, together with policy and process changes implemented in the second half of calendar year 2018.

ANZ Chief Executive Officer Shayne Elliott said: “Consumer sentiment has remained generally subdued with uncertainty around regulation and house prices impacting confidence. While we are maintaining our focus on the Owner Occupier segment, we acknowledge we may have been overly conservative in our implementation of some policy and process changes. We are also taking steps to prudently increase volumes in the investor space”.

Switching volumes for those moving from Interest Only to Principal and Interest during the quarter was $6 billion, of which $4 billion was contractual. The total amount of contractual switching scheduled for the reminder of FY19 is $12 billion. Customers choosing to convert ahead of schedule during the first quarter was in line with the quarterly average for FY18 ($2 billion). Total switching in FY18 was $24 billion.