ANZ agrees to sell shareholding in Metrobank Card Corporation

ANZ has announced it has entered into an agreement with its joint venture partner Metropolitan Bank & Trust Company (Metrobank) regarding the sale of ANZ’s 40% stake in the Philippines based Metrobank Card Corporation (MCC).

More evidence of its “back to the knitting” strategy.

ANZ has agreed to sell half its 40% stake in MCC to Metrobank1, for US$144 million2 (A$184 million). ANZ has also entered into a put option to sell its remaining 20% stake to Metrobank, exercisable in the fourth quarter of FY18 on the same terms for the same consideration. If exercised, this would deliver a total sale price of US$288 million (A$368 million).

MCC is the leading provider of credit cards in the Philippines with more than 1.5 million cards in force. ANZ’s joint venture with Metrobank, which owns the remaining 60% of MCC, has been a successful financial and commercial transaction since it was formed in 2003:

  • ANZ’s original investment in MCC was A$14 million.
  • Since 2003, ANZ has recognised A$177 million of equity accounted earnings and received A$101 million in dividends.
  • MCC contributed A$34.5 million of equity accounted earnings to ANZ in FY16.
  • The sale of ANZ’s 40% stake (assuming the put option is exercised) represents:
    ‒ An implied P/B multiple of 4.4×4.
    ‒ An expected post-tax gain on sale of approximately A$245m5 and an increase in ANZ’s APRA CET1 capital ratio by 9 basis points in FY2018.
  • Excluding the gain on sale, the ROE and EPS impact to ANZ is broadly neutral.
  • The sale is subject to customary regulatory approvals. Payment for the initial 20% stake would occur post receipt of these approvals.

ANZ Deputy Chief Executive Officer Graham Hodges said: “This has been a highly successful joint venture for both ANZ and Metrobank creating the leading credit card company in the Philippines. The sale makes sense for ANZ given our continued efforts to simplify our business and is also a good outcome for MCC and its card customers given the strength of the business. ANZ remains committed to its institutional business in the Philippines.”

ANZ Alerts Customers They Are Turning Off Paper Statements

ANZ customers are receiving emails advising that the bank will turned off paper statements, unless customers click on the link to retain paper distribution. And there is a short cut off date beyond which you need to log into your account to set preferences. Asking to click on a link from an email is in my view inept, in the era of spam or worse, this is not good practice.

This forced migration may save the bank costs, and for some will be convenient, but for those who need physical statements for audit purposes, this is a problem. In addition, people who are not regularly online (yes there are still many who do not use email regularly, even if they are social media), may miss the change and discover an absence of statements down the line.

We wonder if the ANZ will start to charge for paper production later, we hope not, as this would be a further degradation of service.

It seems to me, the bank should have worded its communication more positively, because this comes across as a high-handed action, without taking customer needs into account. One more example of poor culture.

It is probably true that some would be too lethargic to make the switch to digital statements, without a prod, but this approach from the ANZ will be seen by many as just another example of them not thinking about things from a customer’s point of view. It shows that bank has a long way to got to win back customer favour.

A better way would be to incentivise people to switch by sharing some of the cost savings with their customers who elect to go for online statements.

 

 

ANZ to sell pensions and investments businesses to IOOF

ANZ today announced the sale of its OnePath pensions and investments (OnePath P&I) and aligned dealer groups (ADG) business to IOOF Holdings Limited (IOOF) for $975 million. Meantime, the bank continues to review options for its Life Insurance business.

As part of the agreement, ANZ will also enter into a 20–year strategic alliance to make available IOOF superannuation and investment products to ANZ customers.

  • Sale price of $975 million represents a multiple of ~25x FY17 NPAT.
  • Aggregate P&I and ADG annual profit is $39 million.
  • Equates ~17x FY17 NPAT after separation and transaction costs.
  • Estimated accounting loss on sale of ~$120 million5 includes sale proceeds of $975 million, separation and transaction costs of ~$300 million post-tax, and an accounting adjustment of ~$500 million for Treasury shares.
  • Expected to increase ANZ’s APRA CET1 capital ratio by ~15 basis points on completion.
  • EPS and RoE impacts are not material to ANZ.
  • Small ongoing payments through the 20 year Strategic Alliance Agreement.
  • Completion is expected in around 12 months subject to certain conditions including regulatory approvals and the completion of the extraction of the OnePath P&I business from OnePath Life Insurance.

The sale of the pensions and investments and ADG businesses is consistent with ANZ’s strategy to create a simpler, better balanced bank focussed on retail and business banking in Australia and New Zealand, and Institutional Banking supporting client trade and capital flows across the region.

ANZ Group Executive Wealth Australia Alexis George said: “Financial services such as superannuation, investments and advice are a core part of the support we provide ANZ customers now and in the future.

“By partnering with IOOF, we are able to create greater value for our shareholders while also providing our customers with access to quality wealth products from a specialist provider with the right cultural fit, financial strength and digital capability.

“The sale of our P&I and ADG businesses provides ANZ with greater flexibility to consider options for the life insurance business including strategic and capital markets solutions,” Ms George said.

 

‘Yes, we repriced the back book’: ANZ defends rate hikes

From The Adviser

ANZ chief executive Shayne Elliott CEO has explained how it was a first mover on mortgage repricing and why it made a decision to hike rates knowing full well that its customers could move to another lender.

He appeared in Canberra on Wednesday (11 October) where he answered questions before the House of Representatives Standing Committee on Economics, commonly known as the major bank review.

Committee chair David Coleman MP asked the ANZ boss why the group increased rates for existing loans earlier in the year when APRA’s 30 per cent interest-only cap was for new lending only.

“We run a business,” Mr Elliott said. “We need to make sure that it is prudent and that we identify risk and price for it appropriately while still providing a good, decent service to our customers.

“We started changing our approach in terms of lending standards, policy and pricing well before APRA put in place its speed limit. In fact, our first changes around interest-only started in April 2016. We made policy changes, we have reduced the amount of time people can have interest-only, and we have reduced the maximum LVR. That was well before [APRA’s speed limit] because we assessed that the risk in that book was changing and that we needed to be mindful of that.”

Mr Elliott said the first pricing changes the bank made were on 24 March, a week before APRA’s interest-only speed limit came into place.

“Subsequent to the speed limit we came out and reduced rates, we were the first. We reduced rates for people paying principal and interest and we increased others. We did that not knowing what our competitors would do and not knowing what the customer behaviour would be. But we wanted to reward customers who repaid principal, because it is the right thing to do, and we wanted to give them the right signals to move.

“Yes, we repriced the back book but, we also gave price cuts to the back book as well.”

ANZ CFO Graham Hodges added that the bank also introduced its lowest ever fixed-rate at 3.88 per cent for P&I borrowers.

Mr Coleman argued that it is “disingenuous” for a bank to tell its customers, who are not impacted by APRA’s regulatory action, that the bank has determined that it is good for them to move to P&I.

“First of all, we gave people a four-month notice period,” Mr Elliott said. “Whether that’s to move with us or a competitor. Also, when people come to us and asked for an interest-only loan, we assess them on the basis that they can afford to pay P&I from day one. We do assess people’s ability to be able to pay the principal.”

Mr Elliott said the bank modelled the impact of its pricing changes. Asked about the profitability of interest-only loans and the impact of repricing, the chief executive explained that the answer depends on customer behaviour.

“It depends what customers do,” he said, adding that there was an assumption in Mr Coleman’s question that all customers stay with ANZ and don’t move.

“About 10 per cent of our customers with a home loan choose to leave us and go somewhere else each year. There are a lot of factors.

“We absolutely ran an analysis and looked at the fact that by reducing P&I loans by 5 basis points it would come at a cost. That’s about two thirds of our customers who received the benefit of a rate cut.

“We were first. We did that not knowing what the competition would do and at a risk that a lot of those customers would vote with their feet and go somewhere else, or vote choose the fixed-rate, which is a much lower margin product.”

Interest-only loans currently account for approximately 34 per cent of ANZ’s total mortgage portfolio.

Westpac also faced tough questions from David Coleman in Canberra yesterday. Chief executive Brian Hartzer told the committee that interest-only loans accounted for 50 per cent of the Westpac mortgage book.

ANZ acquires REALas to bolster digital offering in Australia’s property market

ANZ today announced it had acquired Australian property start-up REALas to help home buyers access better information about the Australian property market.

Launched in 2011, REALas offers a unique algorithm to predict property prices and has forged a strong reputation as the most accurate predictor of sale prices for listed properties.

Commenting on the acquisition, ANZ Managing Director Customer Experience and Digital Channels Peter Dalton said: “This is an important acquisition for our digital transformation as we know customers are increasingly turning to online resources for help as they navigate the Australian property market.

“It’s also a great success story of an Australian start-up, so we’re really pleased to be working with them and looking at how we might incorporate some of their features into ANZ’s products and services in the future.”

REALas CEO Josh Rowe said: “The algorithm at the centre of our site was built using the latest data science methods, local market knowledge from property experts and crowd-sourced data from buyers. Its predictions change in response to the market, which means buyers have access to the latest prediction right up to the time of sale.

“We’re thrilled that ANZ has recognised the value in what we’ve built over the past six years and we’re looking forward to growing our service and helping people get the information they need to make better decisions when buying or selling property.”

REALas.com will continue to operate independently as a wholly-owned subsidiary of ANZ.

ANZ to offer payments on Fitbit Ionic

ANZ has announced it had partnered with leading global wearables brand, Fitbit, to offer customers the ability to make payments on the run through Fitbit Ionic, the ultimate health and fitness watch.

From today, ANZ’s Australian customers will be able to load their eligible Visa debit or credit cards through the Fitbit app so they can make simple and more secure purchases on the go with a Fitbit Ionic.

Commenting on the new partnership, ANZ Managing Director Products Bob Belan said: “ANZ is committed to being at the forefront of new payment experiences so we’re pleased to be offering our customers a convenient way to pay on the go with their Fitbit Ionic.

“We’re excited to work with an innovative company like Fitbit to offer our customers products and services that are simple to use and helpful in an increasingly digital world.”

“Having done a lot of work with mobile payments in the past, we are well-positioned to establish more partnerships at a faster rate to meet the evolving needs of our customers.”

Customers will need a Fitbit account and an eligible device to pair with their Android or iOS smartphone so they can access the payments service via the Fitbit app. Once set up with their debit or credit card, they simply need to tap the device at any contactless merchant terminal to make a payment.

The announcement comes after ANZ successfully launched mobile payments partnerships with several other companies in the past 18 months, including the world’s largest smartphone manufacturers and software providers.

ANZ tightens up on apartment lending

From The Advisor

ANZ has announced that it will be implementing new restrictions on some loans for residential apartments, units and flats in Brisbane and Perth.

Effective Monday, 2 October, there will be a maximum 80 per cent loan-to-value ratio (LVR) for owner-occupier and investment loans for all apartments in the following inner-city Brisbane postcodes:
– 4000
– 4006
– 4010
– 4011
– 4014
– 4102
– 4171

There will likewise be a new restriction on investment lending for apartments in some areas of inner-city Perth.

Also from 2 October, there will be a maximum 80 per cent LVR for investment loans for apartments in these Perth postcodes:
– 6000
– 6004
– 6104
– 6151

These policy changes apply to all apartments in affected postcodes, including off-the-plan and non-standard small residential properties (≥40m2 & <50m2) valued at less than $3 million.

Granny flats are not impacted by this change.

ANZ has told brokers that applications submitted prior to 2 October 2017 will be assessed under the previous policy (as will applications that have been granted an extension prior to Monday, 6 November 2017).

A spokesperson for the bank commented: “This update for a handful of Brisbane and Perth locations is part of our ongoing efforts to ensure we are lending responsibly and in consideration of all our regulatory responsibilities.

“We regularly look at a number of factors in relation to residential apartments to make sure we are meeting our responsibilities, including supply and demand, rental yield, vacancy rates and location.”

The moves come amid increasing concern of oversupply in apartment building, with several developers making headlines recently for being left with unsold apartments.

Analysts at BIS Oxford Economics suggested in June that new apartment completions in Australia that have been largely bought off the plan by investors will hit a record this year and “most cities will find that tenant demand will not be sufficient to support rents and consequently values”.

According to the report, the whole of Australia, barring NSW which is “heavily undersupplied”, will be in oversupply over the next three years, with the unit market likely to face more challenges than the house market as a result of APRA constraints on investor lending.

Further tightening could be on the horizon

Speaking to The Adviser, Ranjit Thambyrajah, managing director of Acuity Funding, suggested that there could be further tightening by ANZ in the coming months.

The commercial broker said: “Perth has been slowing down and slow for quite a while now and Brisbane is heading that way quite quickly. ANZ, in particular, pulled out of lending for both those states for development a little while ago, so I think [this recent change] is just following on from that.

“I think it’s probably going to be more than those areas, actually. I think they are going to face difficulty in other areas as well, in terms of oversupply.”

He explained: “We’re in the business of funding the developments and we are experiencing a lot of difficulty in funding things in Queensland, particularly with the ANZ bank, and we have the same situation in WA. So, they perceive the oversupply as going to continue for a while, but currently the areas that they are quoted on are the ones that they are experiencing most oversupply in.”

While Mr Thambyrajah said that other areas experiencing oversupply of apartments, such as Melbourne and some areas of Sydney, will “start feeling more tightening as well”, he said that he is not overly concerned by the changes.

“Just because one bank is not lending does not mean others are not. It really depends on their prudential limits to the area and also the blend of their book in terms of APRA guidelines as well.

“So, I’m not concerned by this at all. I think it just changes from month to month and bank to bank.”

ANZ also tightened their underwriting standards according to MPA by issuing a Customer Interview Guide..

Yesterday ANZ issued a Customer Interview Guide which specific which topics brokers should discuss with home and investment loan borrowers.

“We expect brokers to use a customer interview guide (CIG) to record customer conversations as a minimum moving forward,” noted ANZ “while it is not required to submit the CIG with the application, it should be made available when requested as a part of the qualitative file reviews.”

ANZ Also Will Abolish ATM Fees

ANZ today announced it would remove fees for all non-ANZ customers using its fleet of automatic teller machines anywhere in Australia. The change will impact non-ANZ customers who are currently charged a $2 fee when they use an ANZ ATM.

ANZ customers are not currently charged when they use one of ANZ’s more than 2,300 machines. ANZ Group Executive Fred Ohlsson said: “While we had been actively working on how we provide fee free ATMs for our customers, we have decided to remove these fees all together from October.

“We know ATM fees are one of the most unpopular and while our customers have benefitted from our network of ATMs across the country, this is another example of acting on customer feedback as well as genuine reform from the industry,” Mr Ohlsson said.

The change will be implemented in early October 2017.

The ANZ has upped its national housing price forecasts

From Business Insider Australia.

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.