The bank also increased its total credit provisions – money set aside for loan losses – by $245 million, citing increased risks associated with rising inflation, higher interest rates and geopolitical tensions.

Elliott said most of the interest rate buffer that borrowers were assessed against in the past few years had been absorbed, but that strong savings levels and income growth were supporting households.

“Coupled with strong savings levels which, at ANZ, are still rising, higher income growth – particularly for those with home loans who are generally better off than average – and house prices stabilising, household balance sheets remain in good shape,” he said.

While the Australian mortgage market remains highly competitive, Elliott said higher immigration and construction cost pressures would likely underpin house prices, and that, along with strong employment conditions, meant the bank saw continued growth in home lending.

“We’re confident that we can cautiously grow home lending in a low-risk way while maintaining decent returns,” he said.

UBS analyst John Storey said ANZ’s result fell short of consensus expectations with the biggest drag being the decline in the net interest margin.

“This, in our view, reflects the cost of ANZ growing above market during a period of heightened competition and possibly irrational pricing, notably in mortgages,” he said.

ANZ’s average deposits and other borrowings increased 6 per cent, or $44.4 billion, driven by growth in term deposits across all of its divisions. Its home loan balances grew $22 billion over the year.

The bank’s Australian commercial division was its highest-returning arm, with revenue growing 11 per cent over the year, while its institutional division posted record results with all three core businesses including transaction banking, corporate finance and markets generating more than $2 billion in revenue each.

ANZ’s operating expenses increased 6 per cent to $560 million, largely reflecting a $68 million increase in restructuring expenses and a $466 million – or 9 per cent increase – in personnel expenses.