ANZ Bank Targets Sydney Mortgages to Solve 175-Year NSW Woes

Australia & New Zealand Banking Group Ltd., the fastest-growing mortgage lender in October, plans to offer bigger discounts to expand market share in the nation’s largest state economy, New South Wales.

The lender plans to offer special rates and discounts and extend by a few weeks a national promotional campaign to build its retail business in the state, said Matt Boss, managing director for products and marketing. It aims to increase market share from 11 percent to 13 percent in two years, he said.

“We don’t have our natural share in the state’s retail market,” Boss said in an interview in Melbourne Dec. 4. “It is a 175-year-old problem,” he said, referring to ANZ’s historical underperformance in retail banking in New South Wales. Melbourne-based ANZ’s national share is 15 percent, the smallest among Australia’s big four banks.

The plans for the state follow an increased emphasis on home loans by Australia’s most Asia-focused bank. The lender has expanded its home loan market share in 15 consecutive quarters to Sept. 30.

“It is a good tactical idea to focus on New South Wales, which is seeing the strongest demand nationally,” David Ellis, a Sydney-based analyst at Morningstar Inc., said by telephone. “By attempting to gain market share, ANZ shouldn’t loosen lending standards and let interest margins fall.”

Mortgage Revival

Outstanding mortgages across all lenders climbed 5 percent in the year ended Oct. 31, the highest since June 2012, central bank data show. ANZ topped mortgage growth with a 7.1 percent increase in the same period, according to the Australian Prudential Regulation Authority.

“We are actually quite bullish on larger New South Wales,” said Boss, who moved to ANZ from Bank of America Corp. in October 2012. “We expect strong economic growth there.”

New South Wales, the most populous state with 7.3 million people, reported an unexpected budget surplus on Oct. 29, helped in part by higher stamp duty revenue from the increase in home prices and activity.

Dwelling prices in Sydney in the past year climbed the most among the country’s eight capital cities, increasing 12.5 percent in the year through November, according to RP Data-Rismark home value index. Property researcher SQM Research Pty in September forecast prices in the city will soar as much as 20 percent next year.

Home Ownership

About 67 percent of Australian households owned their home as of the 2011 census, compared with 68 percent in 2006. The proportion of households that owned their dwelling outright fell to 32 percent in 2011 from 34 percent five years earlier, government data show.

Australian mortgages are the largest asset class for the country’s four main banks and the biggest profit contributor. Mortgages represent 61 percent of gross loans for Westpac Banking Corp., 60 percent for Commonwealth Bank of Australia, 45 percent at National Australia Bank Ltd., and 42 percent at ANZ, according to a note by UBS AG on Sept. 24.

“NAB made impressive market share gains after dropping rates and launching a marketing blitz a few years back,” Ellis said. “So it is possible to succeed.”

ANZ is the fourth-largest mortgage lender in the country and the fifth biggest in New South Wales, behind Westpac-owned St George Bank Ltd., Boss said. It lags behind CBA, Westpac and NAB nationally.

ANZ offers the lowest variable mortgage rate jointly with NAB in Australia at 5.88 percent and Boss said the bank would consider higher mortgage discounts for customers in New South Wales. Westpac’s benchmark variable rate is 5.98 percent, while CBA offers 5.9 percent, according to their websites.

“I will also give the team a bit more pricing discretion for some deals in the state,” he said. “We can probably be an attacker in NSW.”

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