Australia's ANZ hikes coverage ratio on Mideast risks, beats profit estimates (updated)

ANZ group

30/04/2026 23:33

Half-year cash earnings rise 6%

Operating expenses fall more than 20% sequentially

Interim dividend at 83 cents/share

Updates throughout

By Scott Murdoch and Sneha  Kumar

May 1 (Reuters) - ANZ Group ANZ.AX CEO Nuno Matos on Friday said Australia is likely to avoid recession but the economic consequences of war in the Middle East will be evident for the foreseeable future as tighter oil supply could accelerate inflation.

The comments come after Australia's fourth-largest bank by market capitalisation reported cash profit of A$3.78 billion ($2.72 billion) for the six months through March 31, versus a Visible Alpha consensus of A$3.68 billion.

The bank also said it will increase provisions by A$175 million to cover potential loan loss stemming from the U.S.-Israel war with Iran.

        National Australia Bank NAB.AX and Westpac WBC.AX have similarly announced increased provisions and flagged the war's economic consequences. They report first-half results next week.

"Much of the potential impact of this crisis remains ahead of us," said Matos, who became ANZ CEO almost a year ago.

"But the longer the flow of oil is constrained, the greater the chance the crisis shifts from being primarily an inflation challenge to much more of a supply and growth challenge."

        The consumer price index jumped 1.4% in the first quarter of the year from the previous three months, the sharpest rise since late 2023, showed data released on Wednesday. It rose 4.1% versus the same period a year earlier.

Matos said the conflict has had minimal impact on credit, capital or liquidity, and ANZ's exposure to the Middle East was small.

        ANZ shares opened in positive territory on Friday but were trading down 1.1% versus a 0.95% rise in the S&P/ASX200. The decline came after analysts highlighted ANZ's A$11.5 billion first-half revenue was 1.5% below market estimates.

DOWNSIDE ECONOMIC SCENARIO

        ANZ said its net interest margin, a gauge of profitability, was 1.53% for the first half, 1 basis point lower than the second half of 2025.

        The bank also increased the weighting of a "downside economic" scenario occurring, though Matos said consumer confidence and business conditions have not shown signs of deterioration.

"This supports our central expectation that Australia will avoid a recession," he said.

RISK POSED BY AI MISUSE

ANZ's technology spending was worth A$1 billion in the first half as banks worldwide tackle the threat to banking posed by AI - especially Anthropic's Mythos, the ability of which to expose vulnerabilities in security could be misused.

The financial regulator on Thursday said banks' security systems were not keeping pace AI development and that so-called frontier AI could bring faster and more severe cyberattacks.

Matos said he expects more AI tools, similar to Mythos, will be developed which could increase threats to banks even more.

"Cyber risk for society and financial services organisations is already very high," he said.

Tools such as Mythos are elevating the risk "which means more investment in prevention, faster investment, in order to make sure that we are able to counter these potential threats."

ANZ's cost-to-income ratio fell to 49.4% in the first half from 54.6% in the second half of 2025 as operating expenses dropped more than 20% sequentially.

The bank has been on a cost-cutting exercise since last year which has included the reduction of staff by 3,500.

ANZ, which has the lowest mortgage market share among major Australian banks, declared an interim dividend of 83 Australian cents per share, matching the 83 cents paid a year earlier.

($1 = 1.3899 Australian dollars)

 (Reporting by Scott Murdoch in Sydney and Sneha Kumar and Shivangi Lahiri in Bengaluru; Editing by Jonathan Ananda and Christopher Cushing)

 ((Sneha.Kumar@thomsonreuters.com; Shivangi.Lahiri@thomsonreuters.com))