[Source: Reuters]

ANZ Group (ANZ.AX), opens new tab, Australia’s fourth-biggest lender, said on Thursday that asset impairments jumped to their highest levels since 2021 in the first quarter, driven primarily by mortgages, sending its shares down 3%.

The results capped a largely muted run of trading updates by Australia’s so-called Big Four banks, which have enjoyed higher income on loans in a high interest rate environment, but also struggled with slower credit growth and increased bad debts.

Australia’s central bank announced its first rate cut in five years on Tuesday – a move that will make it easier for borrowers to service debt and ease upward pressure on costs for consumers and banks.

The country’s top lender Commonwealth Bank of Australia (CBA.AX), opens new tab grew its net interest margin but warned of strain on borrowers from high living costs, while Westpac’s (WBC.AX), opens new tab margin shrank in results announcements this month.

Meanwhile, National Australia Bank (NAB.AX), opens new tab, the country’s biggest business lender, said total assets that were impaired or in default hit the highest in at least two years as a proportion of overall loans in the first quarter.

Following suit, ANZ said on Thursday its gross impaired assets increased to A$1.90 billion ($1.21 billion) for the three months ended December 31 – the highest since September 2021.

The bank’s home loans in Australia with repayments more than 90 days late as a proportion of total loans fell by 1 basis point from September quarter, while those in New Zealand increased by 75 basis points.

ANZ said net loans and advances rose 4% in the quarter, with institutional lending accounting for a major portion of the growth. Its quarterly customer deposits also rose 2%.

Citi analysts noted that deposit growth was much stronger across the various business, suggesting a strong focus on gathering savings deposits.

The bank’s common equity tier 1 (CET1) ratio, a closely watched measure of spare cash, stood at 11.5% at December 31, compared with 12.2% as at September 30, and below Citi’s expectations of 12.0%.

Shares of the company fell up to 3.3% by 0018 GMT, while the broader market (.AXJO), opens new tab was down 1%.

ANZ did not disclose any profit figures or its net interest margin in the limited trading update.