ANZ's Cost Discipline Keeps Outrunning Market Skepticism

A cost-out strategy drove the sector's best pre-provision profit growth, and August confirmed genuinely superior margins against CBA and Westpac.

5 Sep 2026 · 2 min read

ANZ has spent 2026 pursuing a cost-out strategy that delivered the best pre-provision profit growth among the major banks, but a shift in strategic focus away from further cost cuts left its May half-year result poorly received even as the numbers themselves were solid, before an August update showed genuinely superior margin performance relative to CBA and Westpac.

Costs, not credit, doing the heavy lifting

Endeavor Asset Management said the stock rose 9 percent in February following a first-quarter FY26 trading update in which costs were well managed and profit came in better than consensus on a run-rate basis, even though credit growth remained relatively unexciting. Management reaffirmed cost guidance of minus 3 percent for FY26, and while Endeavor did not expect the first quarter's strength to repeat exactly, it expected continued cost discipline to support earnings.

A fine result, poorly received for strategic reasons

Pendal Group said ANZ's first-half result was poorly received for company-specific reasons despite being fine on its own terms, with underlying pre-provision profit up 6 percent on the prior corresponding period and 11 percent sequentially, beating consensus by 3 percent, helped by bad debts and costs. The key issue was a shift in strategic focus away from cost-out, with loan growth running at mid-single digits annualised for every major bank except ANZ, whose significant cost-out drove the sector's highest pre-provision profit growth, leaving the market wary that the cost focus was coming at the expense of revenue growth. Perennial Partners said all three majors reporting that month showed weak revenue growth, good cost control and sound credit quality, but had prudently increased bad debt provisions given elevated economic uncertainty.

ANZ saw significant cost out, which drove the highest pre-provision profit growth, but the market is wary this is impacting revenue growth.

— Pendal Group, Newsletter, May 2026

August confirms genuinely superior margin management

Pendal Group said the stock rose 3.1 percent after third-quarter net profit came in 2 percent ahead of expectations on bad debts, and 1 percent below on pre-provision profit, though the quality of the result was strong enough to prompt 2 percent consensus upgrades. Lower markets income was offset by 4 basis points of core margin expansion, a notably better margin outcome than both CBA and Westpac achieved, helped by more stability in New Zealand and a third-quarter skew favouring ANZ's hedge book, alongside continued cost control.

Lower markets income was offset by 4 basis points of core margin expansion, which was a much better margin outcome than CBA and Westpac, helped by more stability in New Zealand and a 3Q skew to ANZ's hedge book.

— Pendal Group, Newsletter, August 2026

What fund managers say they are watching next is whether ANZ's cost discipline, targeting minus 3 percent for FY26, keeps delivering superior pre-provision profit growth, resolution of market concerns about the cost-out-to-revenue-growth strategic balance, continued margin outperformance versus CBA and Westpac, and the trajectory of bad debt provisioning given the cautious outlook all the majors have adopted.