Improved mortgages to support ANZ’s earnings over the next two years

Net interest margin improved 7bps in the six months ending 31 March 2023.

Australia and New Zealand Banking Group’s (ANZ) improved lending in residential mortgages will support its earnings over the next two years, says S&P Global Ratings.

The bank's net interest margin (NIM) improved 7 basis points (bps) across the six months ended March 31, 2023, to 1.75%.

The bank’s planned acquisition of Suncorp-Metway should further help ANZ solidify its competitive position and geographic diversity, the ratings agency said.

Credit losses are forecasted to remain low at 15 basis points in the next two years, in line with Australia’s four major banks.

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“The relatively benign economic outlook, low unemployment, and strong household balance sheets should temper the risks to the Australian banking system from high inflation, rising interest rates, and low business and consumer confidence,” S&P noted.

Capital levels are also expected to remain strong, with a common equity tier 1 (CET1) ratio above 11%. ANZ’s CET1 ratio as of 31 March 2023 is 13.2%, up from 12.3% from the past six months. This reflects strong internal capital generation over the period, S&P said.