Flat yield from ANZ mortgages

ANZ's retail banking arm in Australia is producing the most consistent growth in profit for the bank, up 16 per cent in the 2007 year. The bank continues to find the mortgage portfolio a tough part of the business to wring profit growth from.

The Australian mortgage book increased just below system at 12 per cent over the year to September 2007 to $114 billion.

Due to decreasing margins and increasing non-performing loans, mortgages experienced slower growth and margin pressure, with profit growth of only four per cent over the year and one per cent over the last six months.

This business is also taking the brunt of the current credit squeeze, given ANZ, in line with other major banks, prefers not to raise interest rates for now.

Profit for ANZ's personal division increased 16 per cent for the year. This was driven by super rates of growth in NPAT of 21 per cent for banking products (such as transaction accounts) and 23 per cent for consumer finance (credit cards and personal loans).

Non-performing loans in Australia increased slightly for the year to $507 million. The bank noted that "the increase was driven by mortgages, due to the slower realisation rates of defaulted mortgages with refinance options becoming more difficult, modestly increasing default rates and higher delinquencies in outer Sydney."

Provision for credit impairment in Australia increased 13 per cent for the year to $246 million.

For the 12 months to September 2007, 'competitive pressures' reduced margins in Australian mortgages by two basis points, New Zealand mortgages by one basis point, with an increase in basis risk on variable rate mortgages of one basis point. The majority of the margin damage has come in the last six months.