By Sameer Manekar

(Reuters) -Australia and New Zealand Banking Group beat estimates for first-half profit on Wednesday, helped by a pandemic-fuelled housing boom that spurred lending at Australia’s no. 4 bank, and forecast improved second-half margins as interest rates rise.

The lender expects margins to be partly helped by higher deposit-driven earnings growth as the banking sector steps into a new period of higher borrowing rates.

The Reserve Bank of Australia on Tuesday delivered its first rate hike in over a decade. The Reserve Bank of New Zealand has raised rates at its last four meetings to levels not seen since June 2019.

“Rising rates – that’s going to hurt some people, that’s going to take money out of people’s pockets. But at this point, people are well prepared for it,” Chief Executive Officer Shayne Elliott said.

Chief Financial Officer Farhan Faruqui also urged caution around the effect rising rates would have on business.

“There is uncertainty that lies ahead. Yes, it’s broadly positive, but we have to be also careful that over time we tend to over-anticipate the benefits of interest rate rises because they do get competed away.”

Spurred by a rise in revenue from institutional customers, strong home loan momentum in New Zealand and cost controls, ANZ’s cash profit from continuing operations rose 4.1% to A$3.11 billion ($2.21 billion) and beat a Visible Alpha consensus estimate of A$2.99 billion.

However, net interest margin – a key measure of profitability – eased to 1.58% in the half from 1.65% in the second half https://yourir.info/resources/4d216b570d08af30/announcements/anz.asx/3A579444/ANZ_ANZ_Full_Year_Results_Dividend_Announcement_Appendix_4E.pdf of 2021.

“As I look at the environment in which we had to operate in the half, I actually think it was a very solid result… we managed margins tightly,” Faruqui said.

ANZ, which has lost Australian home loan market share since 2019 amid claims of slow processing times, said capacity improved in the half, and that it was on track to grow in line with other major domestic banks by the end of the financial year.

It also announced plans to establish a new listed parent holding company that would control two wholly-owned distinct groups of entities: banking and non-banking groups, mirroring organisational structure among global banks.

The bank declared an interim dividend of 72 Australian cents per share, up from 70 Australian cents a year earlier.

ANZ’s bigger rivals National Australia Bank and Westpac Banking Corp are both set to report their interim financial results in the days ahead.

($1 = 1.4096 Australian dollars)

(Reporting by Sameer Manekar and Harish Sridharan in Bengaluru; Editing by Shailesh Kuber)