ANZ +4.53%: delivered a solid 3Q26 trading update, with cash profit slightly ahead of expectations, costs and impairments better than feared, and lending growth showing encouraging momentum. Importantly, ANZ also appears less exposed than CBA and Westpac to the current housing slowdown, which could prove an advantage as mortgage activity cools.
Key takeaways:
- Cash NPAT of A$1.90 billion, around 2% ahead of expectations.
- Operating income of A$5.61 billion, around 2% below the 2H26 consensus run-rate.
- Operating expenses of A$2.79 billion, around 3% better than consensus.
- Credit impairment charges of just A$102 million, materially below the expected run-rate.
- CET1 of 12.5%, in line with expectations.
- Net loans increased 3% quarter-on-quarter to A$846 billion, with institutional lending particularly strong.
- Customer deposits increased 4% to A$786 billion, although much of that growth came through institutional markets activity.
The housing backdrop remains soft, but ANZ appears relatively better positioned than some of its peers. Mortgage applications have declined around 12% since the May budget, compared with roughly 15% at CBA and 20% at Westpac. Management expects ANZ’s mortgage book to grow broadly in line with the system over the second half.
That is important because ANZ’s strategy isn’t overly reliant on winning mortgage market share. The bank has a larger institutional and business banking footprint than peers and is focused on growing everyday banking relationships rather than simply chasing home-loan volumes.
Margins were broadly stable, with NIM around 1.54%, while lending growth is beginning to accelerate across both Institutional and Business & Private Banking. Credit quality remains supportive, with non-performing loans steady at just 0.55% of credit exposures.
The other part of the investment case remains CEO Nuno Matos’ ANZ 2030 transformation. The strategy is designed to simplify the group, reduce duplication following the Suncorp Bank acquisition, lower costs and ultimately improve returns. The latest quarter provides some early evidence that this is beginning to work, with expenses tracking favourably and lending momentum improving.
MM’s view: This was a good update from ANZ and, importantly, it reinforces why the bank may be relatively well placed in the current environment. Housing is clearly slowing, but ANZ has less mortgage exposure than CBA and Westpac, while its institutional and business banking franchises provide alternative avenues for growth.
We own ANZ and continue to like the turnaround story under Nuno Matos. It remains the cheapest of the major banks at around 14x forward earnings, although that multiple is no longer outright cheap relative to ANZ’s own history. The opportunity from here is for management to prove it can convert improved lending momentum, cost discipline and the Suncorp integration into sustainably higher returns on equity.
ANZ remains our No 1 pick in the banking sector
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