Australian lender ANZ Group (ASX:ANZ) has disclosed a rise in late home loan payments for the quarter ending June, reflecting growing financial stress among borrowers due to persistent inflation and high interest rates. In a limited quarterly trading update, ANZ reported that the proportion of Australian housing loans overdue by 90 days or more increased by 5 basis points to 84 basis points.
This uptick in mortgage arrears highlights the broader impact of the current economic climate on borrowers. With inflation remaining stubbornly high and interest rates elevated, many households are grappling with increased financial strain. While banks generally benefit from higher interest rates through wider margins on their lending, ANZ's experience underscores how rising borrowing costs are simultaneously affecting borrowers' ability to keep up with their payments.
The update did not provide details on the bank’s quarterly cash profit, but the increase in late payments and rising provision charges suggest a challenging environment. ANZ's total provision charge for bad and doubtful debts stood at approximately A$45 million by the end of the June quarter. This provision is a precautionary measure to cover potential future losses from loans that may default, indicating the bank's cautious stance amid economic uncertainties.
ANZ’s common equity tier 1 (CET1) ratio, a key measure of a bank's core capital, was reported at 13.3% as of the end of June. This is a slight decrease from 13.5% at the end of March. The CET1 ratio is crucial for assessing a bank’s financial health and its ability to absorb losses while maintaining stability.
In addition to these financial pressures, ANZ is currently under regulatory scrutiny related to suspected bond trading allegations. This added layer of regulatory challenge further complicates the bank's situation, potentially impacting its operational focus and financial performance.
Overall, ANZ's recent update reflects the complex interplay between high interest rates, inflationary pressures, and borrower distress. While banks like ANZ are positioned to benefit from higher rates, they are also facing increased risks and operational challenges as they navigate a difficult economic landscape. Investors and analysts will be closely monitoring how these factors evolve and their potential impact on the bank’s financial health and regulatory standing.