ANZ, one of Australia's largest banks, posted a rise in quarterly cash profit to A$1.90 billion, but the bank also flagged a notable slowdown in home-loan demand following recent federal budget changes. The mixed update highlights the balancing act banks face as lending growth supports earnings while housing market momentum fades.
What the numbers show
ANZ said its third-quarter cash profit increased by about 1% compared with the average of the previous two quarters. The improvement was driven by stronger lending growth and a slightly better net interest margin — the difference between what the bank earns on loans and what it pays on deposits. Net interest income, excluding its markets business, rose 2% from the first-half quarterly average.
However, the bank also reported that home-loan applications fell 12% after the federal budget introduced changes to tax breaks for property investors. That drop is a clear sign that borrowing appetite is cooling, even as the bank's overall lending book continues to grow.
Why mortgage demand is cooling
The federal budget changes, which altered tax incentives for property investors, appear to have dampened enthusiasm for new home loans. For everyday borrowers, this could mean less competition among banks for mortgage business, potentially leading to less attractive rates or tighter lending criteria. It also suggests that the housing market, which has been a key driver of Australian household wealth, may be losing some steam.
For ANZ, the decline in applications is a forward-looking indicator. While current lending growth is still positive, a sustained drop in new applications could eventually weigh on future loan volumes and, in turn, on revenue. Banks typically rely on a steady stream of new mortgages to fuel balance-sheet growth, so a prolonged slowdown would be a headwind.
What it means for investors
For shareholders, the profit rise is reassuring, but the mortgage slowdown is a cautionary note. Banks are sensitive to the health of the housing market and the broader economy. If home-loan demand continues to fall, it could pressure ANZ's future earnings growth, even if margins remain stable.
Investors should also watch how the bank manages its net interest margin. A slightly better margin helped lift profit this quarter, but if competition for deposits intensifies or if the central bank cuts interest rates, margins could come under pressure. The cooling mortgage market adds another layer of uncertainty.
In the broader context, ANZ's update comes as other Australian banks are also navigating a shifting landscape. While some sectors, like Telstra's recent profit rise and buyback, show resilience, the housing market's trajectory remains a key variable for financial stocks.
Looking ahead
Investors will be watching ANZ's next moves closely. The bank's ability to grow lending while managing costs and credit quality will be crucial. The drop in home-loan applications is a metric to monitor in coming quarters — if it reverses, it would signal renewed housing demand; if it persists, it could signal a deeper slowdown.
For the broader market, ANZ's update is a reminder that even solid earnings can be accompanied by softer underlying trends. As inflation cools and oil prices slip, the economic backdrop remains mixed, and banks are often the first to feel shifts in consumer and business confidence.
Ultimately, ANZ's profit rise is a positive, but the cooling mortgage demand is a signal that the housing market — and the banks that depend on it — may face headwinds ahead. For everyday investors, this means keeping an eye on housing data and bank earnings for clues about the direction of the Australian economy.
