Is ANZ shifting its lending strategy as housing demand slows?
Business lending gains momentum as mortgage growth shows signs of weakness
ANZ’s latest trading update points to a changing lending environment, with the bank maintaining modest growth in home loans while placing greater emphasis on business lending. The shift comes as higher interest rates, housing tax changes and softer mortgage demand continue to weigh on the residential lending market.
The result was described by IG Markets analyst Tony Sycamore as “steady but unspectacular”, with cash profit growth remaining modest while operating income was broadly flat.
Home lending remains under pressure
ANZ’s Australian retail home loan portfolio increased by around 2% during the quarter, allowing the bank to return to system growth. However, underlying mortgage demand appeared weaker beneath the headline figures.
Mortgage application values excluding the boost from the government’s 5% Deposit Scheme declined 5% quarter-on-quarter and were down 12% from the budget announcement through to the end of July.
The bank also reported early signs of housing stress, with Australian loans more than 90 days past due rising to 86 basis points.
Business lending becomes a stronger growth driver
While mortgage growth has softened, ANZ has been more aggressive in expanding its business lending portfolio.
Loan balances across business banking increased by around 4% over the quarter, highlighting a broader shift among major Australian banks towards supporting business investment rather than relying as heavily on residential mortgages.
This shift could become increasingly important if housing activity remains subdued, as business lending provides banks with another avenue for balance-sheet growth.
What investors should watch next
Investors will continue monitoring ANZ’s mortgage growth, arrears levels and business lending momentum as interest rates and housing conditions remain uncertain.
The ability of ANZ to grow business lending while maintaining credit quality will be particularly important. At the same time, any further deterioration in housing demand or loan arrears could put pressure on the bank’s earnings and asset quality.
For now, ANZ’s latest update suggests the banking sector is beginning to pivot from housing towards business lending, reflecting changing demand across the Australian economy.
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