But the bank's customers have positioned themselves well, chief says
New Zealand’s biggest bank is gearing up for a significant economic downturn as it warns some customers that they will struggle with skyrocketing interest rates.
ANZ reported a record profit of $2.3 billion for the 12 months ending September but has also raised its provisions for bad debts to $751 million as surging interest rates put the squeeze on customers.
Read more: ANZ NZ eyes mortgage test rate increase
ANZ CEO Antonia Watson told Morning Report there were dark clouds ahead for the country’s economy, as she noted that some 50% of the bank’s customers with home mortgages were still on interest rates of 2% or 3% but would be paying more over the next year or so.
“We’re not really seeing any signs of stress at the moment in our customer base; people have saved, they’ve had pay rises ... but that’s going to change, I think, over the next year,” Watson said.
The banking giant had allocated $751 million to help deal with the “bad and doubtful debts” it was expecting in the months ahead, she said.
“We put a lot of that aside over COVID and now we’re looking forward and saying, well COVID sort of seems to be over but we’ve got all these other dark clouds on the horizon,” Watson said.
She said the economy had fared better than anticipated over the past two years – and the bank had benefited from that, but so had some of its customers.
“People are switching from current accounts to term deposits,” Watson said. “Term deposit rates you get start with a four now.”
While mortgage holders face more pain, the ANZ chief said many of the bank’s business and bank customers had positioned themselves well as interest rates increased.
“We've seen saving rates increase, we've seen people paying off debts, we've seen people ahead on their debt repayments; I think we couldn't be in a better position as an economy going into something like this,” Watson told Morning Report.
She said the bank had a range of tools customers could use to help them if they were struggling, but the key was to rein in discretionary spending.
“It’s the medicine we need to take to keep inflation under control,” Watson said.
Those facing higher interest rates on their mortgages could choose to lock in rates 90 days out from their re-fix dates or restructure their home loans by raising the term or moving to interest-only payments, she said.
“Our responsibility right now is to make sure that we’re in a good position to help our customers as people start rolling off the lower interest rates,” Watson told Morning Report.
