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The bank - the country’s biggest - said its net profit, including gains and losses from economic hedges, fell by 7 per cent to $2.135billion for the September year.
On a cash basis, ANZ’s profit was up 10 per cent at $2.262b.
“It is a big number from a New Zealand perspective, but it’s not a big number globally,” Watson told the Herald.
“The thing that is harder to explain to people is that it’s profit - not profitability.
In terms of profitability, Watson said the bank’s research put it at around the middle of the pack when compared with the companies that make up the S&P/NZX50 index, or when compared with similar banks around the world.
There is no doubting that the bank, which has a $950 million wage bill and which is alone responsible for 5 per cent of the corporate tax take, is huge.
“There is a lot of stimulus going into the economy before we make that profit,” she said.
The bank’s result showed that its net interest rate margin fell to 2.60 per cent in the second half from 2.67 per cent in the first, but rose from 2.47 per cent in the previous financial year.
In its result, the bank said it was raising its bad debt provisions in advance of what it expects will be more difficult conditions ahead.
The good performance of the bank in the first half of the financial year reflected the tailwinds of the Covid fiscal stimulus in the economy together with a series of rapid increases in the official cash rate, Watson said.
“But in the second half of the year our performance slowed due to the more difficult environment New Zealand is entering.”
Watson said the bank was well-placed to support its customers and the New Zealand economy as tougher times approached.
In the past 12 months, the bank had contacted more than 290,000 customers identified as most at risk of financial stress to offer reassurance and support.
ANZ New Zealand expects the economy to get tougher. Photo / File
Watson said the high number in part reflected improved technology.
“If you look back through history, whenever we have been in tough times like these - like the Global Financial Crisis (GFC) - we just would not have had the ability to use data and send electronic messages and things the way that we can do now,” she said.
She said there were two things that were different today compared with the 2008-9 GFC market meltdown.
“One is the ability to contact customers and to be quite personalised in that contact.
“The other one is the quality of our lending book.
“It is much stronger with less high loan-to-value ratio lending and more safe and secure agri loans which have seen customers pay down debt over time, rather than staying on interest payments only.
“While we have more lending that is in arrears now - stopped or only making partial repayments - that number is in the 100s and not the 1000s.
“We feel that that number is manageable.”
In general, customers had taken the opportunity during the Covid-19 pandemic to bolster their balance sheets.
Watson said there were a number of measures that could be taken to help people who get into financial difficulty, such as interest-only payments or part payments.
“New Zealand is probably headed into tougher times,” she said.
“Inflation is expected to remain above the Reserve Bank’s target range, interest rates will likely be higher for longer and unemployment is expected to rise.”
She said the bank expected to see more stress among businesses and mortgage holders.
“The majority of our home loan customers have moved on to higher interest rates, and most have adapted well.”
A third of home loan accounts are ahead by six months or more.
But around 34 per cent are on rates lower than 5 per cent, with about a third of those rolling on to higher rates over the next six months.
The bank was closely monitoring how customers were managing and was seeing an increase in the number of people falling behind on payments by 90 days or more.
As a result, she said, ANZ NZ had increased the amount put aside for potential bad debts by $144m, increasing the total credit impairment provisions to $857m.
The bank is also putting more resources into its customer hardship team in preparation.
Across the Tasman, ANZ Bank - the group - reported a record full-year cash profit of A$7.4b ($7.99b), up 14 per cent on the previous year’s.
The bank announced a final dividend of A99c, partially franked at 56 per cent, taking the total dividend to A$1.75 (from A$1.46 last year).
Dual-listed ANZ’s share price fell after the result. In late local trading, the stock was down $1.11 or 4 per cent at $26.72.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
