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Australia’s ANZ missing out on housing boom, even as earnings beat expectations

Australia and New Zealand Banking Group’s (ANZ.AX) annual profit jumped 65% to top market expectations on Thursday as a milder than expected impact from the global pandemic allowed it to release funds kept aside to cover potential bad loans.

But Australia’s fourth-largest lender struggled to benefit from the home loan boom, even as an unprecedented amount of fiscal spending drove a 20% debt-fuelled surge in house prices, with its volumes shrinking in the second half.

Cash profit from continuing operations came in at A$6.20 billion ($4.66 billion) for the year ended Sept. 30, compared with the A$3.76 billion reported a year earlier and beating the average estimate of A$5.96 billion in a Reuters poll.

The bank declared a A$0.70 per share dividend, 2 cents higher than in the previous half and up from 35 cents in the same period last year, when the regulator restricted dividend payments due to the pandemic uncertainty.

The bank’s home volumes in Australia fell 1% in the second half to A$278 billion, which ANZ attributed to a competitive refinancing market, customers paying loans back faster and processing issues.

“We started the year really well in home loans and then, of course, we saw just unbelievable levels of volume across the economy in terms of turnover, people buying and selling houses. Now we didn’t prepare well and that’s on me,” Chief Executive Shayne Elliott said.

The bank was hiring people to address problems with loan processing times and has been making progress since July, Elliott added. In New Zealand, a market the lender dominates, home loans grew 11%.

Net interest margins were one basis point higher to 1.64%, mainly due to ultra-cheap funding costs.

Credit Suisse analysts expected an immediate “neutral” market reaction given the lack of outlook commentary for fiscal 2022 in the material released. The bank is due to brief investors at 2100 GMT or 10 am Sydney time.

ANZ released a further A$567 million it set aside last year for the worst of the COVID-19 crisis.

($1 = 1.3303 Australian dollars)

Reporting by Paulina Duran in Sydney and Riya Sharma and Nikhil Kurian Nainan in Bengaluru; Editing by Arun Koyyur and Karishma Singh

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