ANZ Group Earnings: Strong Institutional Earnings but Paying Up for Home Loan Growth

ANZ Group’s cash profit fell 7% on a very strong previous corresponding period, and down a more modest 1% on the second half of fiscal 2023 as the margin tailwind of cash rate increases continued to be competed away. The negative earnings trajectory has slowed, though, and we expect it will begin to improve in fiscal 2025. With less refinancing activity, a pick-up in new lending, and the term funding facility repaid, we think margins should modestly improve over the medium term on more favorable loan and deposit pricing. However, lower margins might be acceptable if the industry extracts cost savings or reports lower credit losses than historical levels to offset lower revenue growth.