ANZ’s profit has plunged by 42 per cent as one-in-ten home borrowers deferred their mortgage repayments to cope with the coronavirus recession.
At the height of the economic crisis, Australia’s fourth biggest bank has revealed 95,000 out of its one million-plus customers were granted a reprieve of up to six months, between March and September.
This was when those with a mortgage asked to make their repayments at a later date as they were struggling financially, with thousands out of work during the pandemic.
As of October 15, 43,450 borrowers had resumed making full repayments following the end of their six-month deferrals. Other borrowers are still putting off repayments as part of an arrangement with their bank made later in the year.
Another 11,000 have requested an extension of their mortgage holiday, leaving 500 who needed to restructure their loan or get financial help.
ANZ’s profit has plunged by 42 per cent as one-in-ten home borrowers deferred their mortgage repayments to cope with the coronavirus recession. Pictured is a Melbourne Chinatown branch
With Australia’s big banks extending mortgage repayment holidays until March 2021, ANZ chief executive Shayne Elliott said next year could be even more challenging.
‘That may yet come and more likely to have real impacts in 2021,’ he said.
In the year to September 30, ANZ’s cash profit for continuing operations plummeted by 42 per cent to $3.79billion.
This included a $2.74billion impairment as a result of COVID-19.
Mr Elliott said the coronavirus shutdowns had so far only flattened ANZ’s revenue in the latest fiscal year, a better result than some financial forecasters had predicted.
At the height of the economic crisis, Australia’s fourth biggest bank has revealed 95,000 out of its one million-plus customers were granted a reprieve. Pictured are houses in Sydney’s eastern suburbs
‘I mean I think from the bank’s position we have to remember that while COVID is having a massive impact on people’s lives and the economy, actually at the bank that doesn’t really come through in the result for 2020,’ he said.
ANZ finances at a glance
Full-year cash profit for continuing operations: down 42 per cent to $3.758billion
Dividends per share down from $1.60 to 60 cents
Source: ANZ full-year results for September 30
‘So if we look through our underlying business, actually our revenue was flat year-on-year.’
Mr Elliott said setting aside ‘a massive amount of money’ to ‘protect the bank from the potential for any future credit losses’ was the ‘real COVID impact’.
‘That may come if people really did get themselves into difficulty in the future,’ he said.
Financial comparison group Finder’s insights manager Graham Cooke said even a six-month mortgage deferral could see someone paying back an extra $10,000 over 30 years.
‘Deferring your loan repayments may seem like a great idea when you are in financial difficulty. Be aware, however, that there is no such thing as a free lunch,’ he told Daily Mail Australia.
‘Just as the meter keeps running on a cab stuck in traffic, your loan continues to clock up interest even when it is on hold.
‘Debt is always the most important thing to look after when budgeting, so only go down the deferral route if absolutely necessary.’
Canstar’s group executive of financial services Steve Mickenbecker said a deferral was not like a holiday.
With Australia’s big banks extending mortgage repayment holidays until March 2021, ANZ chief executive Shayne Elliott (pictured) said next year could be even more challenging
‘What borrowers are hopefully clear on is that a repayment pause is no holiday,’ he told Daily Mail Australia.
‘Interest is still added to the loan and deferral of repayment means that the amount of the loan goes up, increasing future interest payments.
‘Borrowers will end up paying more interest and higher repayments.’
Mr Cooke said switching lenders was a better option, with some non-bank lenders offering standard variable rates of less than two per cent.
‘One other option open to borrowers is to look for a lower rate and switch lenders,’ he said.
‘With rates at rock bottom right now, there is better value available to potential refinancers than ever before.’
Mortgage repayment deferrals are not classified as missed payments so they won’t affect a borrowers credit score, which lenders use to approve loans.
Source: Daily Mail Australia | World News