Cash profits up as risk management, cost reductions take precedence over deposit growth
Australia’s fourth-largest home lender ANZ delivered what’s best described as a conservative first-quarter update on Thursday.
Australian retail deposits were up 4% on a year-on-year basis in the December quarter, with net loans and advances up 4%.
Home loan balances increased by 3.9%, from $332 billion in the December 2024 quarter to $345 billion in the December 2025 quarter, underperforming system growth of 5.1%.
SME Banking balances remained flat at $25 billion.
While that may sound underwhelming, it’s apparent that volume growth wasn’t on the agenda throughout the quarter.
Rather, Chief executive Nuno Matos pulled ahead with his grand ‘ANZ 2030’ strategy to get the bank’s spending and risk-management behaviours back on course.
Matos said: “The quarterly result highlights the early progress we are making in executing our ANZ 2030 strategy.
“Our productivity program aimed at removing duplication and simplifying the bank is well underway, delivering a significant reduction in expenses while growing revenue… Looking ahead, we continue to be fully engaged in executing our ANZ 2030 strategy. This is the beginning of our five-year journey to become the best bank for customers and shareholders in Australia and New Zealand.”
Reducing “duplication” in the workforce, aka trimming the fat, has been on top of Matos’ agenda since he took control of the bank last May. As has enhancing non-financial risk management.
Thanks in no small part to some 3,500 staff members exiting the bank by the end of 2025, it posted a sharp reduction in operating expenses in this quarterly update, with costs falling to $2.8 billion from a $3.6 billion quarterly average in the second half of financial 2025 – a 21% decline.
Excluding significant items, expenses were down 8% on the prior half’s quarterly run rate. ANZ’s cost-to-income ratio dropped from 65.5% to 49.5%, while its CET1 ratio – a key risk measure for financial institutions – improved by 65 basis points to 12.15% on a year-on-year basis.
Put together, it shows that ANZ is improving its profitability while keeping volume growth on a leash for now. As a result, cash profit (excluding significant items) improved by 17% against the second-quarter average, with return on equity up 160 basis points.
Matos' vision seems to be playing out nicely.
