ANZ has conceded publicly for the first time that it has been bleeding mortgage borrowers to other lenders since January and has implemented measures to fix problems in its loan assessment and broker servicing platforms.
As reported previously in Banking Day, ANZ’s mortgage systems buckled in March at the peak of the buying frenzy in the residential property market.
ANZ’s mortgage division came under severe stress for more than four months.
In May the bank notified brokers that it needed more than a month to assess standard loan applications because it was trying to deal with a backlog of mortgage applications.
Loan applicants who were self-employed were being asked to wait even longer – up to six weeks.
The delays resulted in brokers recommending that clients avoid the bank and direct applications to lenders with shorter turnaround times.
ANZ yesterday revealed some of the financial damage caused by its congested systems.
In its latest quarterly Pillar 3 disclosure document, the bank confirmed a large contraction in its mortgage book in the six months to the end of June, which analysts say equates to a 0.5 per cent decline in home loan market share.
In the three months to the end of June the bank’s Australian mortgage book shrank by A$300 million to $280.3 million in a market in which most other lenders expanded activity.
The negative business impact of ANZ’s back office problems was compounded in the June quarter by a net outflow of borrowers refinancing with other banks.
ANZ estimates that the unfavourable refinancing result wiped $200 million from its mortgage balances in the June 2021 quarter.
In a slide presentation also filed to the ASX, the bank indicated it was taking action to address weaknesses in its mortgage platforms and to reduce turnaround times on applications.
The measures include allocating more staff to assessment functions and further attempts to simplify the back office through automation.
Analysts have wide-ranging views about the extent to which ANZ’s mortgage meltdown will weigh on its second half result.
Evans and Partners senior analyst Matt Wilson believes it will have a negative impact but should be nullified by outperformance in the institutional lending business and margin recovery in New Zealand where ANZ is the largest retail player.
Wilson believes the expected rise in official rates in New Zealand will enhance earnings returns.
Goldman Sachs analyst Andrew Lyons believes the bank’s second half profit is set to benefit from lower than expected bad debt charges, but acknowledged the “weak performance” of the home loan business.
ANZ revealed that the recent spate of state lockdowns had triggered an increase in the number of mortgage and business borrowers seeking loan repayment deferrals.
Repayments have been deferred on about $600 million worth of home loans involving 1300 borrowers.
Most of the deferring home borrowers are NSW customers.
The bottom line impact could be telling in ANZ’s second half result.