ANZ – Page 9 – Digital Finance Analytics (DFA) Blog

The ANZ has upped its national housing price forecasts

ANZ Bank analysts have increased their forecasts for property price growth in Australia.

“Given Melbourne’s recent resilience, we have nudged our 2017 price forecasts higher, and now expect nationwide prices will finish the year 5.8% higher,” write economists Daniel Gradwell and Joanne Masters.

However, they see further evidence that the housing market is cooling.

“Weaker auction results point toward slow price growth through the rest of 2017, while tighter borrowing conditions and higher interest rates for investors are also likely to weigh on price growth in 2018,” they say.

At the national level, dwelling price growth has slowed over the past three months.

Prices are now 9.7% higher than a year ago, down from the peak of 11.4% in May.

Here are the ANZ’s forecasts:

Source: ANZ Bank

“Much of this slowdown appears to be caused by a retreating investor presence in the market, in line with recent regulatory changes,” they say.

APRA’s further crackdown aimed at investor borrowing, particularly those with interest-only loans, has seen the investor share of total borrowing steadily decline.

“In turn, price growth has slowed across most capital cities and regional areas and across detached houses and the unit/apartment market,” say Gradwell and Masters.

“Having said that, the Melbourne market has recently been more resilient than the Sydney market, perhaps reflecting an element of catch-up after Sydney outperformed in previous years.”

The economists note there is no suggestion that prices will fall outright only that price growth will slow.

“Melbourne and Sydney will continue to be the main drivers of this growth, in line with their expanding populations,” they write.

“Strong additions to supply are expected to keep a lid on Brisbane’s prices, while Perth and Darwin are likely to have another year of weakness, as their mining boom adjustment winds up.”

Job Ads Up Again – ANZ

ANZ says Job Advertisements rose 2.0% m/m in August, the sixth straight rise. Job advertisements currently sit 13.3% higher than a year ago.

In trend terms, job ads were up 1.3% m/m in August following a 1.4% rise in the previous month. Annual trend growth picked up slightly, rising from 11.6% in July to 12.5% in August.

ANZ commented:

Job advertisements continue their period of strength, consistent with robust business conditions. Together with other forward indicators and survey-based measures, this strength suggests some downside risk to the unemployment rate in the near term, with employment expected to rise in the order of 15–20k per month over the period ahead.

While the RBA is likely to find the ongoing improvement in labour market conditions encouraging, persistently low wage growth presents some uncertainty to the outlook for both consumption and inflation. The Q2 GDP report, later this week, will provide information on how the economy is tracking overall. We do not expect consumption growth to be particularly weak in Q2 given the increase in household disposable income from additional hours worked. Additionally, the higher than usual increase in the minimum wage (in effect since 1 July) will likely provide some support to spending in Q3.

That said, given the elevated levels of existing household debt and already low savings rate, we find it difficult to envision a sustained increase in consumption growth without some pickup in wage growth and consumer confidence. This will act as a constraint on the acceleration in GDP growth even as business investment picks-up.

ANZ first Australian bank to roll out Voice ID for mobile banking

ANZ says it will today be the first Australian bank to roll out Voice ID technology on mobile banking enabling customers to complete higher value transactions conveniently and securely.

With Voice ID, ANZ customers can now make ‘Pay Anyone’ payments of more than $1000 on their mobile without needing to log into internet banking, or remember additional passwords or PINs, or visit a branch. They can also use Voice ID to make BPAY payments of more than $10,000 on their mobile.

Commenting on the announcement, Managing Director Customer Experience and Digital Channels, Peter Dalton said: “This is a significant security update that will make it easier for our customers to complete high value transactions on their smartphones.

“Customers increasingly want the convenience of banking on their digital devices and this solution delivers that with the added level of voice biometric security.

“This will be particularly good news for our small business customers who regularly need to make payments of more than $1000 on the go and will only need their voice to authorise those transactions.”

The rollout comes after ANZ completed a successful pilot program with the new technology in recent months and will be available for customers using the Grow by ANZ app from today. It will then be rolled out to other digital channels across the bank.

ANZ has developed Voice ID with world-leading voice biometrics company Nuance to bring the new technology to Australian customers.

Nuance managing director Aust & NZ, Enterprise Division Robert Schwarz said: “ANZ is taking a forward-thinking yet secure approach to identity verification with Voice ID, making it fast, easy and secure for customers who are on-the-go to perform high value transactions.

“Through the ANZ mobile banking app, Voice ID uses proven voice biometric technology from Nuance that is more secure and more convenient than legacy authentication methods.”

ANZ released their unaudited Statutory Profit for the Third Quarter to 30 June 2017 was $1.67 billion. Provisions were $243 million. Cash Profit of $1.79 billion up 5.3%. Profit before Provisions increased 0.3%.

Customer deposit growth of 2.3% with net lending asset growth of 2.0% during the quarter.

Revenue decreased 0.3% which in part reflected a normalisation of the Markets business performance after an unusually strong first half along with the sale of 100 Queen Street.

Expenses reduced 1% and continue to be well managed. As flagged the proceeds of the sale of 100 Queen Street are being reinvested in the business with approximately two thirds occurring in the second half, largely in the final quarter.

The Group Net Interest Margin (NIM) was stable, up several basis points excluding Markets. Australia Division NIM improved offsetting a decline in Institutional NIM. The Australian Bank Levy will impact the NIM in the fourth quarter being reflected within the cost of funds.

The reshaping of the Institutional Division asset base continued with Risk Weighted Assets (RWA) reducing a further $3 billion to $156 billion, with a cumulative reduction of $12 billion (-7%) during the Financial Year to date. The changing profile of the book has resulted in a decline in the Division’s provision charge and an improvement in the risk adjusted return (NII/Average Credit Risk Weighted Assets (CRWA)).

Above system growth in residential mortgages in Australia has been primarily driven by the Owner Occupier segment. The Division is tracking well in respect of meeting various macro prudential requirements regarding mortgage growth.

The total provision charge of $243 million was comprised of an Individual Provision (IP) charge of $308 million and a Collective Provision (CP) release. The release of CP was largely driven by continued reshaping of the Institutional portfolio along with some transfers to IP.

The Australian Prudential Regulation Authority Common Equity Tier 1 (CET1) ratio was 9.8% at 30 June, which incorporates 51 basis points of net organic capital generation offset by the Interim Dividend (59 bps) and adoption of the new RWA models for Australian Residential Mortgages. Proforma CET 1 was 10.5%.

Post the end of the third quarter ANZ completed the sale of the Retail and Wealth businesses in China and Singapore to DBS with Hong Kong expected to complete prior to the end of the second-half. All other transactions remain subject to regulatory approvals and completion.

1 Excludes Markets income
2 Source: ANZ analysis of APRA monthly banking statistics

ANZ pays further $10.5 million to consumers for OnePath breach

The Australian Securities and Investments Commission (ASIC) has confirmed an additional $10.5 million in compensation for 160,000 superannuation customers who were affected by breaches within the OnePath group between 2013 and 2016.

ASIC has been monitoring the resolution of a number of OnePath breaches. This has resulted in ANZ (the parent company of OnePath) providing further compensation, mainly in relation to incorrect processing of superannuation contributions and failure to deal with lost inactive member balances correctly.

ASIC has also confirmed the finalisation of all recommendations made by an independent review of OnePath’s business activities. The final two recommendations were the last to be implemented after an independent review of OnePath’s compliance functions was announced in March 2016.

The independent review was sought by ASIC, following ANZ reporting a number of significant breaches. The review addressed OnePath’s life and general insurance, superannuation, and funds management activities.

OnePath has contacted the majority of affected customers and finalised the majority of these additional compensation payments. Customers who have queries about whether they are owed compensation or another form of remediation should contact OnePath on 133 665.

ASIC will continue to monitor the breaches reported to us by ANZ until the matters are resolved, including any remediation where appropriate.

Background

The ANZ Group’s subsidiaries with AFS Licences include OnePath Custodians Pty Ltd, OnePath Life Limited, OnePath Funds Management Limited and OnePath General Insurance Pty Limited.

From early 2013 to mid-2015 around 1.3 million OnePath customers were affected by breaches requiring refunds and compensation of around $4.5 million, rectifications and other remediation of around $49 million.

An ANZ spokesperson said:

In March last year we estimated we would reimburse about $4.5 million in relation to compliance breaches that affected 1.3 million customers.

Following detailed analysis this has increased $10.5 million impacting 160,000 customers.

While this work is ongoing, we don’t expect the majority of these customers to receive significant further reimbursements.

As soon as we became aware of issues in 2013 we reported these breaches to ASIC and have fully cooperated with their review of this matter.

In January 2016 we appointed PwC to conduct an independent compliance review, and reported the findings of that review in December 2016.

ANZ Job Advertisements continue to trend up

ANZ Job Advertisements continue to trend up, rising 1.5% m/m in July in seasonally adjusted terms. Total job ads are now up 6.5% since the beginning of the year. Annual growth picked up from 10.5% in June to 12.8% this month.

In trend terms Job Advertisements were up 1.0% m/m in July following a 1.3% rise in the previous month. The trend growth rate has averaged 1.1% m/m over the first seven months of the year, compared to 0.3% m/m over the same period a year ago.

ANZ said:

“Recent data has shown a clear improvement in labour market conditions consistent with elevated business conditions, profitability and capacity utilisation.particular, the strength in full-time employment and a solid increase in hours worked (near 3.3% y/y) are quite encouraging. Among other things we think this strength has contributed to the lift in consumer
confidence from its recent low point in April.

That said, several challenges remain and we expect the pace of improvement to moderate over the medium term. First, the level of underutilisation remains high and business surveys suggest
that it is likely to fall only gradually. Second, the drivers of growth over the next few years look to be less labour intensive given the slowdown in housing construction and the expected
contribution of labour-lite LNG exports to growth. We also don’t expect the recent strong pace of public sector jobs growth to continue. Lastly, despite the improvement in labour conditions,
wage growth is sluggish and is expected to remain so.

Broadly, forward indicators and survey based measures point towards near-term jobs growth in the order of 15-20k per month. Given the importance of the labour market and wage growth to the course of monetary policy, we will be closely watching the Q2 Wage Price Index number, out on August 16.”

ANZ is the first Big Four bank on both Samsung Pay and Apple Pay

From Business Insider.

ANZ has joined Samsung Pay, becoming the first of the big four Australian banks to be on all three major digital wallets.

The bank had already been the only one of the majors to be on Apple Pay and was already available on Android Pay.

“Samsung has strong device market share in Australia and many of our customers love its open approach to technology, so it made sense for us to work with them in bringing this convenient and secure mobile payments solution to our customers,” said ANZ product managing director Bob Belan.

ANZ joins Westpac and a range of smaller institutions on the Samsung platform, which allows contactless payments through selected Samsung smartphones and Gear smartwatches.

The Commonwealth, NAB and Westpac have resisted getting onto Apple Pay while they, along with some smaller banks, fought to negotiate collectively with Apple in order to gain access to the iPhone’s near-field communications (NFC) chip which would allow their own apps to make contactless payments.

Apple has denied the request, arguing access would be a security risk and accusing the banks of acting as a cartel to “free load” from its technology.

Meanwhile, former Google Australia boss and now ANZ digital banking head Maile Carnegie said in February that her company had no hesitation in joining Apple Pay.

“People were asking specifically for Apple Pay. They were asking specifically for Android Pay. And if that’s what they want, we needed to figure out the most pragmatic way of giving that to them,” she said at the time.

“We could look back and say, ‘I wish that was us, I wish they wanted our digital wallet as much as they wanted [Apple Pay]’. But they didn’t.”

Belan also stuck to a similar line this week regarding Samsung Pay, citing customer demand.

“At ANZ, we believe our customers are best placed to make their own choices about which digital wallet works best for them,” he said.

The addition of ANZ now sees Samsung Pay have more than 40 Australian credit and debit card brands in its stable, along with more than 100 loyalty cards. Internationally the platform has more than 870 bank partnerships.

Successful blockchain trial for bank guarantees

ANZ and Westpac have teamed with IBM and shopping centre operator Scentre Group and have now successfully digitised the bank guarantee process used for commercial property leasing.

The trial used Distributed Ledger Technology (DLT) to eliminate the need for current paper-based bank guarantee documents, resulting in a single source of information with reduced potential for fraud and increased efficiency.

The partners involved in the trial have today released a whitepaper detailing how the solution worked and how it could be used in other situations that rely on bank guarantees.

In addition to eliminating the need for physical document management, the trial also addressed other inefficiencies in the current bank guarantee process, including the challenges in tracking and reporting of a guarantee’s status through multiple changes.

This forms part of a broader plan to build a shared solution with the rest of the industry, and to invite other organisations to participate in a larger pilot.

Commenting on the successful trial, Mark Bloom, Chief Financial Officer at Scentre Group, said: “An update of the decades-old process for issuing, tracking and claiming on guarantees is long overdue.

“With approximately 11,500 retailers across Australia and New Zealand, who use guarantees to support rental obligations, manual tracking of guarantees has been an extremely cumbersome and labour intensive process.”

Nigel Dobson, General Manager Wholesale Digital, Digital Banking at ANZ, said: “We have been keen to avoid the hype surrounding blockchain and distributed ledger technologies, and instead focused on practical and deliverable use cases.

“This proof of concept demonstrates how we can collaborate with our partners to develop a digital solution for customers, which also has the potential for industry-wide adoption.”

Andrew McDonald, General Manager Corporate and Institutional Banking at Westpac, said: “This is about removing the cost of fraud, error and operational risk that will continue as long as bank guarantees remain paper-based and manually issued.

“Next steps involve encouraging all industry players to adopt this technology so we can better protect and save money for our customers. Beyond that there is no reason why this couldn’t be applied across other industries.”

Dr. Joanna Batstone, Vice President and Lab Director of IBM Research Australia, said: “Using an agile approach, IBM collaborated with ANZ to combine the bank’s deep knowledge of the industry and their partners, with IBM’s blockchain expertise.

“The business use case demonstrates the opportunity to lift efficiency and transparency for all parties involved. We believe blockchain can potentially drive productivity across all Australian industries.”

This blockchain trial used Distributed Ledger Technology (DLT) powered by Hyperledger Fabric V1.0 – a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation. You can view the whitepaper.

ANZ’s opening address – Senate Economics Legislation Committee on Major Bank Levy Bill

ANZ’s address makes three points. The levy should be temporary, should be applied to foreign banks, and the costs will be passed on in one way or another.

Good morning and thank you for the opportunity to appear today.

With me today are Rick Moscati, our Group Treasurer, and Jim Nemeth, our Head of Tax. While ANZ is disappointed by the bank levy, we accept that it will become law.

Our aim today is to work constructively to ensure that the legislation is as fair and efficient as possible.

We appreciate the changes made already to the treatment of derivatives and that the rate of the levy is reflected in the Act.

I have three points to make briefly today in relation to our submission.

Firstly, as one of the principal reasons for the levy is budget repair, we think that the levy should cease when the budget returns to surplus.

Secondly, we believe the levy should apply to major foreign banks operating in Australia and exclude the offshore branches of Australian banks. This would be consistent with principles of international taxation, avoid double taxing Australian banks and mean that all major banks in Australia, foreign or domestic, are treated equally. Without the levy applying to major foreign banks, Australian banks will be at a significant disadvantage in the institutional markets where foreign banks mainly compete.

Further, we borrow money in offshore branches to lend to offshore institutional customers. If the levy applies to our foreign branches, it makes us less competitive overseas. This will constrain Australian banks’ ability to develop offshore business and serve customers in the region.
Recent amendments to the UK levy are consistent with this. That levy applies to large foreign banks operating in the UK and is being amended to exclude UK banks’ offshore liabilities.

The reasons for this approach include ensuring UK banks are not hurt by operating offshore and to tax foreign and domestic banks equally. The same rationale applies to Australia.

My last point is that we are concerned about the combined impacts of increased bank regulation and the levy.

We believe there should be appropriate reviews of how these policies interact.

Speaking to international investors recently, they share these concerns, not just in relation to the banking sector, but also in relation to broader investment in Australia.

The points I’ve made concerning a levy sunset and reviewing its cumulative impact with other policies would help alleviate these concerns.

Before I close and to anticipate your questions, we have not decided how we will respond to the levy. In any event, there are legal limitations to what I can say today.

However, we cannot ‘absorb’ the levy. Based on ANZ’s 31 March Balance Sheet, we estimate that the annualized financial impact of the levy would have been $345 million before tax.

It is an additional cost that the shareholders, customers and employees of ANZ will bear.

Our options are to reduce what our owners receive, reduce our costs or charge higher prices.

As announced last year, ANZ has already reduced what our owners receive by cutting our dividend. We are also already focusing heavily on reducing absolute cost levels. We have reduced costs over the last year and announced that we are working on further reductions.

ANZ will continue to work constructively with you and your Parliamentary colleagues to ensure that the levy is as fair and efficient as possible.

House price growth to ‘slow sharply’: ANZ

From Investor Daily.

In a housing market update this week, ANZ Research said it expects “prices to slow sharply this year and next” and flagged the potential oversupply of apartments – particularly in Melbourne and Brisbane – as a key concern.

“The twin issues of housing affordability and financial stability are front of mind for governments, the RBA and APRA,” the bank said. “Household debt is at record levels, which increases vulnerability to future shocks.”

According to ANZ, the residential construction cycle has lost momentum with approvals down about 20 per cent from their 2016 peak. The major bank expects another 5-10 per cent fall in the next 6-12 months.

“That said, the solid pipeline of work suggests that the level of residential construction activity will slow only gradually this year. There has been a slight rise in settlement risk which bears close monitoring,” ANZ said.

ANZ believes that the housing market will steadily cool going forward with a combination of further regulation and changes to government policy, tighter borrowing conditions and out-of-cycle mortgage rate increases all expected to weigh on the outlook for prices.

“We anticipate nationwide dwelling prices will rise by 4.5 per cent through 2017, before slowing further to 1.9 per cent 2018 and expect to see continued divergence across regions,” the group said.

While price growth in Sydney and Melbourne is expected to slow to well below historical averages, ANZ said these markets will remain positive as demand and population growth remain elevated.

“On the other hand, prices are expected to ease slightly through 2018 in Brisbane, given the significant volume of supply due to hit that market,” the bank said.

Tag: ANZ