ANZ$2.5bn ANZ profit triggers backlash

ANZ New Zealand’s record NZ$2.5 billion annual profit has ignited a sharp public and political backlash, highlighting tensions between bank profitability, cost-of-living pressures and the structure of the financial system. While the result reflects balance-sheet strength and disciplined risk management, it also exposes persistent concerns about market concentration and banking margins in a high-rate environment.

The mechanism behind the profit surge lies in widened net interest margins and disciplined cost control. Elevated policy rates have boosted interest income even as loan growth moderated, generating strong returns on an asset base built over years of mortgage expansion. Operational efficiency and low impairment charges further supported earnings. These dynamics are not unique to ANZ; they mirror patterns across New Zealand’s major banks, which benefit from scale, low competitive churn and strong customer stickiness.

However, macro conditions amplify controversy. Households face elevated mortgage payments, real incomes remain compressed, and inflation has eroded purchasing power. Against this backdrop, record bank profits fuel political narratives about perceived imbalance between bank returns and customer hardship. Economists calling the figure “insulting” reflects broader concerns about whether the banking sector is capturing too much value relative to the economy’s strain.

From a policy perspective, the result could influence regulatory direction. Discussions around bank-levy frameworks, competitive neutrality, capital ratios and market concentration may re-enter the policy arena. Public pressure can accelerate reviews of competition policy, mortgage-pricing practices, and regulatory costs passed on to customers. The government’s existing inquiry into banking competition could gain momentum.

For investors, the earnings stability reinforces the attractiveness of New Zealand’s banking sector, but reputational and regulatory risks must be priced. Strong profits can attract scrutiny that leads to tighter oversight, higher capital buffers or mandated customer-support measures. Over time, these adjustments may affect returns.

The result also interacts with monetary policy. Elevated bank profitability indicates that margin compression — typically expected during early easing cycles — has not yet materialised. If the RBNZ delays rate cuts due to inflation persistence, margins may remain firm, but political pressure could intensify. Conversely, if rate cuts arrive sooner, margins may narrow, easing public pressure but reducing earnings.

Forward indicators for profitability include mortgage-growth trends, deposit-rate competition, RBNZ rate-path expectations and regulatory signals. ANZ’s result may prove a peak if rate cuts compress margins and credit losses normalise.

The controversy ultimately highlights a long-standing debate: whether New Zealand’s concentrated banking system delivers efficient outcomes for households and businesses during economic stress.