ANZ posts $1.9bn quarterly profit as home loan demand slips 12%

ANZ Group has reported a cash profit of A$1.9 billion for the three months to end-June, while revealing that home loan applications fell 12% after the Australian government scrapped certain property investment tax concessions.

The lender, the smallest of the country's 'Big Four' banks by market value and mortgage share, is the latest major bank to signal weaker residential borrowing demand following the May Budget changes.

Profit for the quarter was supported by a 1 basis point improvement in net interest margin to 1.54%, a key measure of lending profitability. The bank also recorded a bad-debt charge of A$102 million, well below analyst forecasts of up to A$205 million, as non-performing loans remained stable despite three interest rate rises this year.

ANZ's shares rose as much as 3.4% in early trading, outperforming a 0.4% decline in the broader S&P/ASX200 index. Analysts attributed the share price gain to a 3% reduction in costs to A$2.75 billion for the quarter, excluding a NZ$125 million class action settlement.

"We think the market should receive well the better performance on costs," said Citigroup analyst Thomas Strong.

Australia's major banks have reported home loan application declines ranging from 12% to 20% since the tax changes. Auction clearance rates are at six-year lows, and average property prices have fallen about 2% over four months, according to property consultant Cotality.

The country's top four banks control more than 70% of the national mortgage market, making residential lending a key earnings driver for the sector.

ANZ said lending growth and a modest improvement in margins supported earnings during the quarter, with net interest income excluding markets rising 2% from the first-half quarterly average. Its common equity tier 1 (CET1) ratio stood at 12.51% as of June 30.