The big four bank Australia and New Zealand Banking Group Ltd (ASX: ANZ) is in focus as management admitted that it got things wrong.
ANZ is one of the biggest banks on the ASX. It is facing intense competition in the mortgage space from the likes of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Bank of Queensland Limited (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), Macquarie Group Ltd (ASX: MQG), Pepper Money Ltd (ASX: PPM) and so on.
There are three key parts for how much lending profit ANZ, or any bank, can make – the size of its loan book, the net interest margin (NIM) and the amount of bad debts (and provisions).
But ANZ said to shareholders that it had dropped the ball in terms of lending recently.
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Problems with lending processing
At the company's annual general meeting (AGM), the ANZ CEO acknowledged in the big four bank's FY21, it saw home loan revenue growth of more than 10% but the number of home loans on its books fell during the second half.
It attributed this decline to two factors.
First, customers were paying down loans faster.
Second, the speed at which it was able to process an increasing number of applications "just wasn't sufficient".
According to reporting by the Sydney Morning Herald ANZ chair Paul O'Sullivan said about its processing of mortgage applications:
Let me be frank, we got it wrong. Although we expanded capacity, we didn't expand capacity enough. And as a result, we lost market share to those who could process it.
We have spent a lot of time at board and management understanding this issue. There has been significant work done to bring in new processes, new ways of handling things and to look externally at best practice, so we can learn from that and improve.
Yes it's been a disappointing performance, but there has been a lot of work done to get us back on track.
ANZ said that it took urgent action to fix those processing issues by materially increasing its assessment capacity as well as simplifying and automating processes.
Whilst it's still early days and there is much to do, ANZ said it is seeing improvements in its processing times and a modest return to balance sheet growth.
However, ANZ admitted that processing applications in a timely manner has resulted in a loss of market share. The board said it was confident that the systemic actions taken by management will address those issues.
ANZ is expecting Australian home loan portfolio to return to growth in this half and for ANZ growth to be in line with the overall system growth in the second half of the current financial year.
ANZ share price snapshot
Whilst ANZ shares have risen 17% over the last year, it is actually down 3% over the past six months.
