No out of cycle rate cuts likely from ANZ as profits surge amid very healthy mortgage book

Big four bank ANZ is unlikely to cut mortgage rates outside of the RBA cycle, chief executive Mike Smith has hinted following the release of stronger than expected half-year results.

ANZ beat analysts’ expectation, posting a 10% rise in first-half cash profit to $3.2 billion for the six months to March 31.

Profits were boosted by the bank holding back some of the rate cuts announced by the RBA during the reporting period.

The bank passed on 40 basis points out of the 50 basis points cut from the cash rate by the RBA in October and December last year following its monthly independent interest rate reviews.

Apart from not passing on cash rate cuts in full, ANZ has twice lifted its mortgage rates out-of-cycle with the RBA since going it alone on rate decisions.

ANZ increased variable rates by 6 basis points in February last year and by 6 basis points in April.

It has yet to cut the cash rate out of cycle.

Smith said where the bank was placed in terms of its interest rate setting was “appropriate” in a media briefing following the release of the interim results.

The half-year results reveal the bank grew its loan book by $5.8 billion (2%) from $182 billion in mortgage funds under management to $188 billion, comprising 860,000 mortgage accounts with owner-occupiers making up 62% of its mortgage portfolio.

The growth in mortgage lending was driven by a $3.3 billion increase in variable rate residential lending and a $2.4 billion increase in commercial lending, driven bygrowth in fixed loans and tailored commercial facilities.

It share of the mortgage market increased from 14.5% in February 2012 to 14.7% in February 2013, with the bank reporting above system mortgage growth for 13 consecutive quarters.

Just 6% of its new lending has been to first-home owners while nearly a third of its borrowers have interest-only loans.

The bank’s mortgage book is in a healthy overall state with 59% of its borrowers more than a month ahead on mortgage repayments.

Borrowers have built up an average equity position of 48%, meaning on average, they own nearly half of their homes outright.

This compares to an average equity position of 35% at the time they originate their home loan.

The proportion of borrowers more than ninety days behind on their mortgage payments comprise just 0.41% of its total mortgage portfolio.

The results reveal the mortgage brokers are more popular than the bank’s own branches (46% versus 41%) for originating home loans with brokers also securing a bigger average loan size of $308,000 compared with $251,000 through branches, mobile lenders and online sales.

ANZ  will pay an interim dividend of 73 cents.