Shashwat Awasthi

(Reuters) – Australia and New Zealand Banking Group joined Westpac on Monday in warning of lower margins. It also warned about a first-half hit by “softer” markets performance, sending shares to a nearly one-year low.

ANZ didn’t disclose a profit for quarter but said that the group net interest margin fell by 8 basis points. However, it added that New Zealand’s rising interest rates would ease some of the pressure during the second quarter.

Lenders from Australia are struggling to squeeze margins against stiff competition for mortgage loans. This is due in part to the record-low interest rates that Australia has seen since the COVID-19 epidemic. Westpac last week warned about its margins.

ANZ stated that October’s “softer” revenues in the markets business would impact first-half results. However, its performance over subsequent months was consistent with fiscal 2021 trends.

The quarter saw the reverse of A$44m ($31.2m) in bad-debt provisions. But, changes to make it more affordable for Australian retailers and businesses would lead to a decrease of A$140m annually in annual operating income, it said.

Citi analysts stated in a note that “Given uncertainty about asset quality and reduced activity going forward,” they expect the bad debt benefit to be reviewed, with investors focusing on the lower than anticipated revenue print.

ANZ shares fell as high as 5% to A$25.73. This was its lowest point since February 17, 2021. The broader market, however, was 0.7% lower.

ANZ reported that it has made significant progress in improving its home loan system. Application times for basic loans are now comparable to those of major lenders.

The Australian home loan market has been steadily declining since 2019. In October, the bank stated that it plans to increase its home loan portfolio in line with larger competitors by the close of the current year.

ANZ stated that it will consider increasing its A$1.5billion buyback. It reported a CET1 ratio of 11.6% at December 31.

($1 = 1.4136 Australian dollars)