Australia and New Zealand Banking Group is bracing for a rise in household financial stress over the next six months as cost-of-living pressures start to have a meaningful impact.
Chief Executive Shayne Elliott on Thursday told shareholders that while household finances appear to be in good shape, the lender was keeping a close watch on signs of stress amongst its borrowers.
"I can't over emphasise the impact cost-of-living pressures are having in the community. There is particular stress with regard to cost of living and the resulting rise in inflation expectations does drag on consumer confidence," he said at the company's annual general meeting in Adelaide.
Inflation in Australia is expected to peak at around eight per cent in the current quarter. The Reserve Bank of Australia last week lifted its benchmark cash rate for the eighth month in a row to 3.1 per cent, in its battle to rein in inflation.
All the major banks, including ANZ, have passed on the rate increases in full, raising fears of a spike in defaults next year as borrowers face higher repayments along with increased living costs.
ANZ is also facing a challenge in the New Zealand market by virtue of being the country's largest bank and fund manager. The Reserve Bank of New Zealand last month hiked interest rates by a record amount and warned that the economy might have to spend an entire year in recession to bring inflation under control.
ANZ is focusing on customers most exposed to stress, including those with less secure employment, who possibly bought homes right at the peak of the house price cycle, or those who have suffered other shocks like family breakdown or illness.
"For those few that will experience stress, we have kept in place the additional hardship resources we built during COVID-19," Mr Elliott told shareholders, while emphasising the bank is well positioned to support them.
ANZ reported a full-year cash profit of $6.5 billion in October.
Australia's third-largest lender by market value is seeking to expand its footprint after agreeing in July to buy Suncorp's banking business for $4.9 billion.
Chairman Paul O'Sullivan backed the deal saying it would provide ANZ exposure to Queensland's fast-growing economy, an additional customer base of 1.2 million people and a platform to expand its offerings to the retail and commercial sectors.
The acquisition is awaiting approval from the Australian Competition and Consumer Commission and federal Treasurer Jim Chalmers.
Meanwhile, ANZ shareholders voted in favour of the bank's remuneration report and the granting of restricted rights and performance rights stock to Mr Elliott.
However, like its peers, the Big Four lender's board faced repeated questions about its climate change policies and plans to stop financing for coal, oil and gas expansion projects.
Advocacy group Market Forces, which put forward a resolution that ANZ demonstrate that its operations will not be used to finance new fossil fuel projects, called the bank "Australia's most prolific financier of fossil fuels", saying it was undermining its own commitments.
Mr O'Sullivan acknowledged the shareholder interest in ANZ's lending to the resources sector but said the bank was engaging with its largest emitting business customers to support them through the transition to net zero.
"We recognise there is a transition underway in the economy but we also are very sensitive to the impact of abrupt overnight changes in energy supply," he said.
The bank was looking to ensure "a just and orderly and well-managed transition to a net zero position in line with the Paris Agreement."
ANZ shares were trading around $23.95 on Thursday.
