ANZ Plunges Into Huge Profit Drop Due to Bad Loan Provisions

ANZ saw a drop in profits due to higher provisions for bad debts as borrowers grapple with the financial blow from COVID-19.

ANZ saw a drop in full-year profits after increasing its provisions against deteriorating loans as borrowers struggle to recover from the economic fallout of the global health crisis.

The bank’s cash profit for 2019-20 was $ 3.7 billion, down 42% from $ 6.4 billion a year earlier.

“This decrease is mainly due to full-year credit impairment charges of $ 2.74 billion, which increased from the previous year due to the impact of COVID-19 and a write-down in the first half of Asian associates of $ 815 million, also linked to the pandemic. ANZ said Thursday.

S&P Global Ratings said provisions and resulting earnings were broadly in line with expectations.

The rating agency said the arrangements positioned the bank well to absorb the credit losses COVID-19 would likely inflict.

“We maintain our view that the bank’s capital situation should remain strong,” he said.

Total loan deferrals fell to $ 71 billion, down from their peak of $ 125 billion in June.

Australian home loan deferrals were reduced to $ 51 billion, with around 20% of households extending their deferral period by another four months and less than 1% going into trouble.

Wealth management group Ord Minnett noted that “ghosts” do not appear to be a material issue, with only about 3% of deferral clients not responding to contact attempts.

ANZ chief executive Shayne Elliott said the bank entered 2020 in a robust state.

“We have a strong balance sheet with record levels of capital and liquidity as well as provisions for potential future losses,” said Mr. Elliott.

“The events of the past 12 months make it difficult to predict the course of the next year.

“What I do know, however, is that we are in excellent shape to face any challenges that present themselves.”

He defended ANZ’s new climate change statement, which was released as part of the annual results presentation, and read that the bank would “engage with 100 of our top-emitting clients, focusing on energy, transport, buildings and food, beverage and agriculture ”while increasing loan support for renewable energy and low-carbon gas.

Some media coverage suggested this meant ANZ would shift its support away from farmers.

“I want to assure you that absolutely is not the case,” Mr. Elliott said.

“ANZ’s climate change statement focuses on the top 100 carbon emitters and will have no impact on the bank’s on-farm lending practices.

“We remain firmly committed to supporting Australian farmers and producers, now and into the future. “

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