ANZ To Cut Some Credit Card Rates

ANZ has today announced it will reduce purchase interest rates on two credit cards by up to 2.00%pa, which is the lowest these rates have been for customers since 2003.

Effective Thursday 23 February, ANZ will reduce the purchase rate on its Low Rate Platinum card by 2.00%pa to 11.49%pa, and its Low Rate Classic card by 1.00%pa to 12.49%pa.

More than 500,000 existing ANZ Low Rate accounts will benefit from the new rates with the majority of those customers who pay interest every month to save about $150 a year.

Announcing the changes, Group Executive Australia Fred Ohlsson said: “Our customers with Low Rate accounts are typically middle income Australians who predominantly use their credit card for everyday household purchases, such as groceries.

“We’ve listened to customer feedback about credit card rates and decided our Low Rate customers would benefit most from a rate reduction as they are more likely to have ongoing debt from month to month. These changes mean they will have the best rate available from any of the major banks or any of the regional banks owned by the majors,” Mr Ohlsson said.

ANZ’s Low Rate Classic card also offers the lowest annual fee of the major banks for similar cards at $58, and has a minimum credit limit of $1000 making it accessible to a wide range of customers.

The Low Rate Platinum card has an annual fee of $99 and a minimum credit limit of $6000. It also comes with a range of insurances, including overseas travel and medical, and up to nine additional card holders at no extra cost. Both cards feature up to 55 interest free days on purchases.

Key crossbench senator Nick Xenophon welcomed the announcement, but said the banks needed to do more to address the cost of credit cards.

“The gap between the official cash rate and credit card rates has never been higher and I think that we really need to look at some form of either greater market competition, or the banks need to really explain themselves in gouging consumers in this way,” he told ABC TV on Sunday.

ANZ Trading Update – NIM Under Pressure

ANZ released their trading update for 3 months to 31 December 2016. Whilst the information is selective, and unaudited, we see growth in home lending supporting retail banking, along with deposit growth, but group net interest margin “declined several basis points” (not specified) and capital ratios down a little.  Cost management was a highlight. Disposal of “non-core” assets will help the result.  The credit environment is marginally better than expected, they say.

The unaudited results show a statutory net profit of $1.6 billion up 8% compared to the quarterly average of the second half of FY16. Cash Profit was $2.0 billion up 31% (Adjusted Proforma up 20%) benefited from a good performance in Australia and New Zealand Retail and in Institutional along with a lower provision charge and the sale of 100 Queen Street.

Profit before Provisions was up 17% (Adjusted Proforma up 9%). Revenue was up 7% (Adjusted Proforma up 4%), expenses down 4% (Adjusted Proforma down 1%) driven by current and prior period productivity initiatives and tight cost management. Total risk weighted assets (RWAs) rose from $409 bn in Sept 16 to $412 bn in Dec 16.

However Group Net Interest Margin (NIM) declined several basis points (bps) reflecting lower earnings on capital and higher funding costs driven by improving liability mix from strong deposit growth.

In Australia, home lending volumes grew, whilst commercial lending volumes were more subdued. Deposit growth was strong.

Institutional banking benefited from favourable trading conditions on the back of movements in the USD and yield curve.

Gross Impaired Assets increased 1.8%.

The Total Provision charge was $283 million with the Individual Provision (IP) charge $325 million. A Collective Provision release of $42 million was assisted by portfolio composition improvement and exposures transferring to IP. There were no changes to management overlays.

APRA Common Equity Tier 1 (CET1) ratio was 9.5% at 31 December, compared with 9.7% in June 16. Excluding the payment of the 2016 Final Dividend (net of the Dividend Reinvestment Plan), CET1 increased 40 bps in the first quarter, primarily driven by organic capital generation of 48 bps which is substantially stronger than the Post Basel III 1Q average of 21 bps.

There was no capital benefit from asset disposals in the quarter.

Strong deposit growth and solid progress with the Group’s term wholesale funding plan has contributed to a further improvement in the Group’s liquidity and funding position. The Group’s average Liquidity Coverage Ratio (LCR) for the quarter was 137% (proforma 132% if adjusted for the $6.5 billion reduction in the Committed Liquidity Facility effective January 2017). ANZ’s Net Stable Funding Ratio (NSFR) is estimated to be in excess of 108%.

The Basel III leverage ratio is 5.1%.

Since the start of FY2017, ANZ has signed agreements to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB), the UDC Finance business in New Zealand and ANZ’s Retail and Wealth businesses in five Asian countries. The transactions are expected to complete in the second half of FY2017 and 1H2018 subject to regulatory approvals. For the purposes of comparison, if the earnings from the businesses being sold were to be excluded from Cash Profit performance for 1Q17 it would show an increase of 33% (+31% including).

In FY2016 a number of actions were classified as Specified Items which formed part of the Group’s Cash Profit. This classification assisted investors and analysts to look through the impact of strategic initiatives to determine underlying business performance trends and included the disposal of Esanda, restructuring charges, a write down of the valuation for the investment in AmBank, and accounting methodology changes. In 2017 the classification of Specified Items will be limited to the impact of disposals.

These transactions outlined above will boost ANZ’s APRA CET1 position by ~$2.7 billion or ~70bps upon completion further improving ANZ’s capital flexibility.

Here is ANZ CEO Shayne Elliott speaking to BlueNotes on video after the announcement.

 

 

Job Ads Up In January

The ANZ Job Ads series for January, released today shows a significant rise in January, and reversing the December fall.

Job advertisements jumped 4.0% m/m in January more than reversing the 2.2% fall in the previous month. Annual growth in job ads bounced to 7.1% y/y, up sharply from 3.7% y/y in December.

In trend terms, job ads rose 0.6% m/m once again in January. The annual rate picked up slightly to be 6.1% y/y this month from 5.5% y/y in December.

“The solid rise in ANZ job ads in January is consistent with the increase in business conditions and confidence reported last week. The bounce in conditions, ongoing strength in house prices and last week’s mammoth trade surplus, suggest to us that the underlying fundamentals of the
economy remain solid despite the disappointing Q3 GDP report.

That being said, not all recent data have been strong. While the jobs report posted reasonable employment growth (including in full-time employment), the uptick in the unemployment rate was disappointing.

But the bounce in ANZ job ads, along with modest increases in other leading indicators, lends support to our view that although momentum in the labour market has slowed, it remains strong enough to underpin a gradual decline in the unemployment rate this year.”

ANZ dumps accelerator payments

From Australian Broker.

Sales staff at ANZ have been told of a new bonus overhaul in an announcement that follows the release of the Sedgwick review’s Issues Paper on banking remuneration.

Speaking to the Australian Financial Review, Catriona Noble, managing director of retail distribution Australia at ANZ, said that satisfaction would be deemed a more important metric than sales targets when calculating staff bonuses.

She also confirmed the dumping of accelerator payments which reward staff with a higher rate of commission as sales volumes increase.

The overhaul will also eliminate financial gateways which incentivise cross-selling targets through pre-defined conditions.

The risks of both forms of payment were highlighted in the Issues Paper on Remuneration in Retail Banking released on Tuesday (17 January).

ANZ’s new incentive plan will come into force on 1 April and use a “balanced scorecard” approach, the AFR reports. This system will give a 70% weighting to customer and teamwork metrics and a 30% weighting to sales targets.

“Discretionary incentive payments will be based on a Banker’s whole-of-role performance relative to their peers (i.e customer, people, financial, risk/process measures, and our ANZ Values),” an ANZ spokesperson told Australian Broker.

“This new way of determining incentive payments will better recognise those who are performing strongly across all aspects of their role, with emphasis on both objectives (what is achieved) and values (how it is achieved). This will increase the focus and weighting on the customer as an important measure.”

The bank decided to keep a certain levels of sales targets after conducting a trial over 10 branches in which sales targets were eliminated entirely. End results found that sales numbers declined across deposit products, home loans, wealth management and business products.

With this information, ANZ decided to combine both customer outcomes and staff financial performance in its new scorecard.

“We felt it was important for our staff to have a strong desire to compete to have a customer choose us for a home loan,” Noble told the AFR. “This is not about creating a need to make a sale. But for a customer that has a need [for a mortgage], it is about making sure ANZ is their number one choice.”

To assess customer satisfaction, ANZ will conduct “A to Z reviews” with customers – an interview that assesses individual goals and needs to match the customer with the right products.

“We recognise the need to improve our ability to look after customers and meet their expectations, so customers can trust the bank, and [know] the solutions we recommend to them are appropriate and in their best interest and not just in the best interest of the bank,” Noble said.

She acknowledged that to implement these changes, ANZ leaders would have to be competent and capable as both coaches and evaluators of more subjective measurements such as customer satisfaction.

Lost or stolen cards replaced instantly with ANZ digital wallets

ANZ today announced its customers can continue to use their digital wallets when they report their card as lost or stolen with a new service that automatically updates their replacement card details.

As soon as a customer calls to report their debit or credit card as missing, ANZ puts a stop on the original card and automatically uploads the new virtual card details to the customer’s digital wallet.

ANZ Managing Director Products Australia, Katherine Bray said: “Our customers report about 670,000 cards as lost or stolen each year and we know waiting for a new card to arrive can be a real inconvenience.

“Now our customers can keep using their digital wallet, whether it’s Apple Pay or Android Pay, to make purchases while they wait for the new physical card to arrive in the mail.

“For many customers their smartphone is now the primary way they do their banking, including making purchases, so we’re working hard to keep improving their mobile experience with changes like this.”

ANZ has also made it possible for customers to keep their existing Personal Identification Number (PIN), provided it hasn’t been compromised, meaning less change with the same high level of security.

ANZ is the only major Australian bank to offer both Apple Pay and Android Pay with about 8.3 million transactions made across the bank’s digital wallets last year.

ANZ agrees to sell UDC Finance

ANZ today announced an agreement to sell UDC Finance, the asset finance business of its wholly owned subsidiary ANZ Bank New Zealand, to HNA Group, a global company focused on tourism, logistics and financial services.

The sale price is ~NZ$660m and will benefit ANZ Bank New Zealand Limited CET1 ~50 basis points and the ANZ Group by ~10 basis points.

The sale reflects a continued focus by ANZ on simplifying its business and capital efficiency.

ANZ New Zealand CEO David Hisco said: “The sale of UDC is consistent with our strategy to simplify the bank and is a good outcome for customers and staff. HNA Group is one of the world’s largest asset finance and leasing companies, and it intends to preserve UDC’s operations including offering continued employment to all staff.”

The transaction also includes the Esanda name and trademarks in Australia and New Zealand. The additional consideration for the name and trademark sale is not material to ANZ.

The UDC sale is subject to closing steps and conditions including engaging with investors on the replacement of the Secured Investment program and regulatory approvals. Completion is expected late in the second half of the 2017 calendar year.

Jobs Ads Fell In December – ANZ

According to the ANZ,  Job advertisements fell 1.9% m/m in December following a 1.6% rise in the previous month. Annual growth in job ads dropped to 3.7% y/y, down from 6.0% y/y in November.

In trend terms, job ads rose 0.3% m/m in November, a touch lower than the 0.4% rise in the previous month. Annual growth remained stable at 4.7% y/y in the month of December, but has fallen sharply from an average of 9.4% y/y over Q1 2016.

ANZ Senior Economist Jo Masters commented:

“After four consecutive monthly rises, ANZ job ads fell sharply in December, the first fall since July 2016. This weakness is consistent with softer business conditions and corporate profitability.

While a disappointing outcome, we see the labour market as losing some of its previously strong momentum not stalling. Indeed, ANZ job ads rose by 0.5% over Q4 and in trend terms continue to rise.

While the labour market has clearly lost some momentum, business and consumer confidence remain elevated, capacity utilisation appears to be on the rise, and retail sales have strengthened recently. As such, we continue to expect conditions in the labour market to support an ongoing, albeit gradual, decline in the unemployment rate this year.”

ANZ agrees to sell its 20% stake in Shanghai Rural Commercial Bank

ANZ today announced it had reached agreement to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB) to China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited for A$1,838m, equivalent to ~40bp. They say there is no material impact on overall profitability from the sale. However, in the financial year 2016 ANZ recorded a post-tax profit of A$259m (full year profit) associated with its 20% stake in SRBC.

This underscores the re-balancing of ANZ back to Australia as mentioned in the earlier results.

The agreement will see COSCO and Sino-Poland Enterprise each acquire 10% of SRCB for a total consideration to ANZ of RMB9,190 million (A$1,838 million). The sale price represents a price-to-book ratio of approximately 1.1 times SRCB’s net assets as at December 2015.

The sale will increase ANZ’s APRA CET1 capital ratio by ~40 basis points.

ANZ’s relationship with SRCB has been a successful financial and commercial transaction since the investment was made in September 2007.

  • ANZ has invested a total of A$568 million in SRCB. Since 2007, ANZ has recognised A$1.3 billion of equity accounted earnings and received A$178 million in dividends. In the 2016 Financial Year the SRBC investment contributed A$259 million to ANZ’s post-tax profits.
  • ANZ’s minority investments in China have also helped provide ANZ with a stronger understanding of the Chinese banking system which has supported the expansion of ANZ’s branch network in China and the approval of ANZ’s full banking licence in China in 2010.

ANZ Deputy Chief Executive Officer Graham Hodges said: “This partnership has been beneficial for both ANZ and for Shanghai Rural Commercial Bank. SRCB is now a strong, successful bank with a prosperous future.

“As we have previously stated, the sale reflects our strategy to simplify our business and improve capital efficiency.

“The sale will also allow us to focus our resources on our Institutional Banking business in Asia. This includes a significant commitment to China over the past 30 years with 100% ANZ-owned branches in Beijing, Shanghai, Guangzhou, Chongqing, Chengdu, Hangzhou and Qingdao serving our institutional clients,” Mr Hodges said.

After transaction costs and taxes, the sale price is broadly in line with the carrying value of the investment in ANZ’s accounts as at 30 September 2016. This includes accumulated equity accounted profits and foreign currency translation reserves over the period of investment. However, if completion occurs after the end of the first half of the 2017 financial year, accounting timing differences will result in a negative impact to net profit after tax in the first half, and a largely offsetting positive impact at completion.

The sale, agreed on 31 December 2016, is subject to customary closing conditions and regulatory approvals and is expected to be completed by mid-2017.

ANZ’s OnePath implements improvements overseen by ASIC

ASIC has confirmed the completion of an independent review by PwC of Australia and New Zealand Banking Group’s (ANZ) OnePath’s compliance functions that was announced in March 2016.

The Independent compliance review of ANZ’s OnePath following breaches resulting in compensation of approximately $4.5 million.

This review followed the reporting to ASIC of a significant number of breaches by the ANZ Group in relation to its life insurance, general insurance, superannuation and funds management activities operated through its wholly-owned OnePath group of companies.

PwC has now completed its review. PwC made six recommendations for improvements to OnePath’s compliance framework. OnePath has implemented four of these recommendations and has committed to complete the other two by early 2017. ASIC will continue to monitor OnePath’s implementation of these final two recommendations.

Background

The ANZ Group’s subsidiaries covered by this review include OnePath Custodians Pty Ltd, OnePath Life Limited, OnePath Funds Management Limited and OnePath General Insurance Pty Limited.

See 16-069MR Independent compliance review of ANZ’s OnePath following breaches resulting in compensation of approximately $4.5 million.

ANZ Announces Appointment of Customer Fairness Advisor

ANZ today announced the appointment of Colin Neave AM as its Customer Fairness Advisor, a new role to help improve fairness of the bank’s products and services for retail, small business and wealth customers in Australia, reporting to Chief Executive Officer Shayne Elliott.

Following a distinguished career of public service at the highest levels, Mr Neave will shortly leave his role as Commonwealth Ombudsman. He is a former Chief Ombudsman of the Financial Ombudsman Service, the Australian Banking Industry Ombudsman, Chairperson of the Legal Services Board of Victoria and Vice Chair of the Australian Press Council.

Mr Neave was recognised as a Member of the Order of Australia in June 2005 for service to public administration and to the banking and finance industry.

Commenting on the appointment, Mr Elliott said: “This is a significant new appointment designed to help us more consistently deliver fair and responsible banking to our retail and small business customers.

“Colin’s deep experience in financial services, examining and resolving the most difficult of issues, makes him the ideal person to provide us with frank and independent assessments of the fairness of our products and services. This includes the impact they have on customers, particularly those in vulnerable situations.

“Colin’s initial focus will be to help us listen and to better understand the key retail and small banking issues by speaking to our customers and relevant stakeholders including our regulators and NGOs.

“As a first step Colin will be to help us establish our Remediation Principles so that we have a consistent set of standards we stick to when things do go wrong. He will also conduct a Fairness Review of our core retail deposit and credit products to ensure they continue to operate fairly, including their fees and charges. Our decade old basic banking account, for the most vulnerable, will be part of this review,” said Mr Elliott.

Mr Neave will be based in Melbourne and will commence with ANZ early in 2017.