ANZ profit plunges by 42% as one-in-ten borrowers defer their mortgage

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 is when those with a mortgage asked to make their repayments at a later date as they are struggling financially, with thousands out of work during the pandemic. 

As of October 15, 43,450 borrowers had resumed making full repayments.

Another 11,000 requested an extension of their mortgage holiday, leaving 500 who  needed to restructure their loan or get financial help. 

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.

‘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.

‘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.’

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.