Australia's ANZ Banking Group, parent of ANZ New Zealand, is highlighting record NZ home loan volumes in its first quarter trading update.
In an interview with ANZ offshoot Bluenotes, ANZ Group CEO Shayne Elliott talks of strong home loan growth in both Australia and NZ.
"...we had record volumes in our New Zealand home loans business – we’ve been really run off our feet there in terms of supporting Kiwis into homes," Elliott says.
The most recently available Reserve Bank of New Zealand (RBNZ) industry-wide mortgage market data, for November, shows the total amount advanced, at $9.3 billion, was an all-time record, smashing the previous record of $7.8 billion set just the previous month. A feature of the growth over recent months has been growth in loans to property investors. Banks advanced $844 million to investors with deposits of below 30% in November, compared to $204 million in November 2019.
Meanwhile, figures released by CoreLogic on Wednesday show first home buyers' share of the housing market dropped to 22% in January, the lowest it has been since the first half of 2018, while property investors' share climbed to 41%. The RBNZ is reintroducing high loan-to-value ratio restrictions on home lending after removing them in response to the COVID-19 pandemic last year.
In late October ANZ NZ CEO Antonia Watson told interest.co.nz the bank was on track for a record home lending month in October. The bank's previous record month, during the 2015-16 period, saw it do more than $600 million of net new lending. ANZ NZ is the country's biggest home lender with residential mortgages at $89.544 billion as of September 30 last year.
The ANZ Group says its December quarter unaudited cash profit from continuing operations came in at A$1.810 billion, a 54% increase on the average of the last two quarters of the bank's September 2020 financial year.
"And at some point, when the environment is more certain, we’ll be in a great position to decide what’s the best way forward. What are the options? Well obviously we’ve got to think about the dividends and that will be a decision for the board. There are other capital management opportunities and of course there’s growth. And we do see growth opportunity – our ability to redeploy some, maybe not all of that capital, to really sow the seeds for future growth and opportunity for shareholder interests over the long-term," Elliott says.
ANZ NZ, along with other NZ banks, has been blocked by the RBNZ from paying dividends to its Aussie parent and redeeming bond issues since last April "until the economic outlook has sufficiently recovered.” In November the RBNZ said this would continue until at least March 31 "to support the stability of the financial system."
The ANZ Group says it supported 145,000 home loan and commercial customers in Australia and NZ with repayment deferrals to help them manage the impact of COVID-19. Only about 1% of home loan customers in Australia and NZ are still receiving COVID support, the group says.
"In Australia, 84% of deferred home loans have rolled off with 98% returning to repayment. In New Zealand, 92% of loan deferrals have rolled off with 86% returning to repayments."
Loan provisions have also turned around for the group. Its total provision result in the December quarter was a net release of A$150 million. This comprises an individually assessed provision charge of A$23 million and a collective provision release of A$173 million. The release of collective provisions is equivalent to 10% of the A$1.7 billion set aside during the 2020 financial year.
The ANZ Group says the low individual provision charge reflects the continued effect of government and bank support for customers affected by COVID-19. Whilst the collective provision release is described as "prudent when balancing the improvement in the economic outlook at the end of the December quarter with the level of ongoing uncertainty."
"As at 31 December, the collective provision balance of A$4.801 billion represents additional reserves of A$1.425 billion compared to pre-COVID levels at 30 September 2019," the ANZ Group says.
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The most recently available Reserve Bank of New Zealand (RBNZ) industry-wide mortgage market data, for November, shows the total amount advanced, at $9.3 billion, was an all-time record, smashing the previous record of $7.8 billion set just the previous month. A feature of the growth over recent months has been growth in loans to property investors. Banks advanced $844 million to investors with deposits of below 30% in November, compared to $204 million in November 2019
It's always about the houses.
That’s what science is; you try something and if it doesn’t produce the desired results you know it didn’t work. You stop doing it. In terms of QE, a third go-round would’ve at least proved it couldn’t have been “quantitative.”
Bank reserves at any level, Bernanke replied, “are not the issue.”
“CHAIRMAN BERNANKE. The issue is the state of financial conditions. And we are still able to lower interest rates, improve, broadly speaking, asset prices, and that provides some [stimulus] incentive.”[my emphasis] Link
Banks extend 60 % of their lending to one third of already wealthy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive, to do so.
In March 2017, former Treasury and Federal Reserve (Fed) official, Peter R. Fisher, delivered a speech at the Grant’s Interest Rate Observer Spring Conference entitled Undoing Extraordinary Monetary Policy.
Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.
There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?
There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.
Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.
The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.
When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.
But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.
But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax.
https://www.grantspub.com/files/presentations/FISHERGRANTSREMARKS15MAR1…
Wait Jacinda has concerns too https://www.nzherald.co.nz/lifestyle/jacinda-ardern-wants-to-help-find-…
"The ANZ Group says its December quarter unaudited cash profit from continuing operations came in at A$1.810 billion, a 54% increase on the average of the last two quarters of the bank's September 2020 financial year."
Ok, so summary is the ANZ has been absolutely creaming it on writing loans for this ponzi of a housing market that both central banks and governments openly admit they will never let it decline in value, let alone fail. Put another way, it's like the Government saying to bank shareholders, "invest your money in this sector and we promise there is no risk as it will only ever go up in value!".
At what point do we say enough is enough and together try and grow other parts of the economy other than housing. It just seems absurd, does it not?
"At what point do we say enough is enough..."
That point came and went about 14 years ago.
Before that, you could possibly excuse those who thought 'house prices going up makes me wealthy!" as that is all we were told and saw for the previous ~30 years.
But today? We should, and do, know better. Yet nothing is, or will, be done.
Disgraceful on every level; societal; governmental and economically.
It's a disaster in the waiting.
(But, Hey. Should I care? I'm a wealthier than I was this time last year...... Repeat that thinking by 1,000,000 'home' owners in New Zealand, and there's the problem - and it's Political.)
"...we’ve been really run off our feet there in terms of supporting Kiwis into homes"
'first home buyers' share of the housing market dropped to 22% in January, the lowest it has been since the first half of 2018, while property investors' share climbed to 41%.'
I think he meant to say "we've been really run off our feet in terms of supporting current homeowners use paper wealth to increase their debt and bid up house prices"
Run off their feet catering to investors with lots of cash perhaps.. screw anyone else.
Just mucked us around for months. What I don’t really understand is that a broker told us our application changed because they changed their criteria mid-application.
How is it, the banks change their policies instantly for FHBs but will allow pre-approved investors to buy up everything in sight before the new changes come in.
How long can we simply watch whilst banks continue to pump excessive credit against the existing housing stock, whilst making access to credit challenging for property developers who aim to increase the said stock. Banks should be forced to hold additional capital for investor loans immediately and restrictions should be placed on recycling of equity to acquire further investments. There needs to be some brave steps taken by our politicians and central bank, unfortunately it is clear that this group are not up to the task.
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