ANZ's H1 cash earnings largely flat, margins stay pressured
AUSTRALIA'S ANZ Group reported largely flat first-half cash earnings on Thursday (May 8), as persistent competition in the home loan market and a rise in asset impairments offset lending growth.
Intense competition to sell cheaper home loans to customers hurt by higher interest rates and living costs has been pressuring the bank's margin.
In February, the Reserve Bank of Australia delivered its first interest rate cut since November 2020, and markets have priced in another quarter-point reduction later this month.
'While initial rate relief was welcomed by retail and commercial customers, we know many continue to face challenges,' said ANZ outgoing chief executive officer Shayne Elliott, who will hand over the reins to Nuno Matos next week.
Its net interest margin, a key measure of profitability, was stable at 1.56 per cent compared with the same period last year, but narrowed two basis points from the April-to-September 2024 period.
Gross impaired assets increased 48 per cent to A$2.5 billion in H1 – the highest since March 2021 – mainly driven by a rise in home loan restructuring.
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ANZ's Australian retail division logged home loan growth of 3 per cent, while core institutional lending was up 4 per cent.
The country's fourth-largest bank said cash profit was A$3.57 billion (S$3 billion) for the six months ended Mar 31, compared with A$3.55 billion a year earlier and the Visible Alpha consensus estimate of A$3.54 billion.
'The future of global conditions is uncertain and there will continue to be periods of increased volatility,' Elliott said, adding that the bank's balance-sheet strength will allow it to navigate the uncertainty.
The Melbourne-based lender declared an interim dividend of 83 Australian cents per share, in line with the year earlier. REUTERS
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Straits Times
6 hours ago
- Straits Times
Jetstar Asia's exit shrinks options for consumers, but unlikely to dent Changi's hub status
News analysis Jetstar Asia's exit shrinks options for consumers, but unlikely to dent Changi's hub status SINGAPORE – Jetstar Asia's impending exit after more than two decades in Singapore is a blow to budget-conscious travellers, even if the low-cost airline's modest 3 per cent share of Changi Airport's traffic might suggest otherwise. Although Changi remains well-served by other budget carriers on busy routes such as Bali and Jakarta, Jetstar Asia's departure will sever non-stop links to four emerging holiday spots. The Singapore offshoot of Australia's Jetstar – which began operations in December 2004 – is the only airline that serves Okinawa in Japan, Wuxi in China , Labuan Bajo in Indonesia and Broome in Australia from Changi. While Changi Airport Group (CAG) has said it would work with other airlines to restore connectivity , the prospect of losing non-stop connections to these cities comes at a time when Singapore is looking to aggressively expand the number of destinations linked to Changi. The airport is connected to about 170 cities worldwide, and the target is to surpass 200 cities by the mid-2030s, when Terminal 5 opens. Maintaining as many air links as possible is good for airlines and consumers, especially when low fares are in the mix. This also strengthens Changi's competitiveness as a transit hub. Jetstar Asia, which is 49 per cent owned by Australia's Qantas and 51 per cent by Singapore company Westbrook Investments, cited higher airport fees and aviation charges, as well as intensifying competition, as reasons it had become unsustainable to continue operations at Changi. Mr Linus Benjamin Bauer, founder and managing director of aviation consultancy BAA & Partners, said rising costs are squeezing low-cost carriers. 'Many airlines still operate under pre-pandemic pricing models, but face a vastly more expensive cost base,' he said, adding that more exits or mergers, especially among smaller budget airlines, can be expected. The writing had been on the wall for some time for Jetstar Asia. It was the slowest of the three Singapore-based carriers – the others being Singapore Airlines (SIA) and its budget arm Scoot – to rebound from the Covid-19 pandemic. Its fleet of 13 Airbus A320 aircraft is down from 18 before the pandemic. Its move from Changi's Terminal 1 to Terminal 4 in March 2023 – which the airline protested publicly – also lengthened connecting times for passengers transferring to Qantas or its partner airlines. T4 is a distance from T1, where Qantas operates, for instance. When Singapore announced its latest round of airport fee hikes in November 2024 to fund improvements to Changi Airport and defray rising costs , Jetstar Asia had warned the increases would have an impact on its ability to offer low fares. It also noted that most of CAG's planned upgrades do not apply to T4, where it operates. Under the new fee structure, landing, parking and aerobridge charges for narrow-body jets such as the A320 will rise yearly, climbing from about $1,200 per landing before April 2025 to $1,725 in April 2030. Passenger fees will also go up in stages until the end of the decade. Passenger fees at Changi are already steeper than those in regional hubs such as Bangkok. While such costs are seen as necessary to help airports fund infrastructural improvements to meet future demand, the increases have made it increasingly difficult for low-cost carriers such as Jetstar Asia to keep air fares low – their key selling point – without passing the extra costs on to customers. 'Singapore has become a high-cost environment for a low-cost carrier, and Qantas Group and Jetstar feel they can get better returns on their assets in other markets,' said Mr Mayur Patel, Asia head at consultancy OAG Aviation. It does not help that in some cases, full-service carriers such as SIA can also offer low fares if tickets are booked early. This is because they have the flexibility of deploying wide-body or narrow-body aircraft, depending on demand. After its closure, Jetstar Asia's 13 planes will be redeployed progressively across the Qantas Group to support fleet renewal and growth in Australia and New Zealand in line with demand. The low-cost airline's closure comes as global demand for air travel remains strong. Airlines are expected to fly a record 4.99 billion passengers in 2025 – a 4 per cent increase from 2024 – according to the latest forecast from the International Air Transport Association. The Asia-Pacific region is driving this growth. So why has Jetstar Asia struggled to take advantage of this? This has partly to do with the intensity of competition on seven of the 16 routes that it serves, which are operated by at least three other airlines, data compiled by Mr Patel showed. Singapore-Bali is served by nine airlines including Jetstar Asia, Singapore-Jakarta by eight, and Singapore-Kuala Lumpur by seven. Even fellow low-cost carrier AirAsia has scaled back on some routes of late, likely due in part to higher operating costs. It dropped its Singapore-Ipoh and Singapore-Phuket services, and cut back flights to Bangkok's Don Mueang Airport earlier in 2025. Jetstar Asia's exit leaves SIA and Scoot as the only Singapore-based carriers. While consumers will have one less option, choices still abound, with one-fifth of the 100 airlines at Changi being low-cost carriers. Overall, they serve more than half of the 170 cities that the airport is connected to. Mr Patel said any connectivity gaps left by Jetstar Asia's exit can be filled only in the short to medium term by other carriers. This is due to delays in the delivery of new aircraft and the time needed for capacity changes. Ultimately, Jetstar Asia's withdrawal from Singapore will shrink the choices available to consumers, particularly those eyeing the non-stop links it served exclusively. But its limited market share means that the impact on Changi's standing as a hub will likely be minimal. Kenneth Cheng is assistant news editor at The Straits Times. He oversees transport coverage, spanning the land transport, aviation and maritime sectors. Join ST's WhatsApp Channel and get the latest news and must-reads.
Business Times
6 hours ago
- Business Times
Why China biotech is getting a DeepSeek moment, too
FROM artificial intelligence to military defence, China has offered a few DeepSeek moments this year, showing that the country is more than just the world's biggest factory, and that it also can compete with the United States on the technology front. Now biotech is having its own. In late May, Pfizer agreed to pay a record US$1.25 billion upfront to license an experimental cancer drug from Shenyang-based 3SBio, as well as making a US$100 million equity investment in the Hong Kong-listed biotech company. Two weeks later, Bristol-Myers Squibb said it would pay BioNTech US$1.5 billion guaranteed to license a similar cancer asset. It was a win for BioNTech, which bought Biotheus, the Chinese company that developed the drug, late last year for US$800 million. Increasingly, big pharmaceutical companies are seeing Chinese biotech as the disruptors. These two deals will allow Pfizer and Bristol-Myers Squib to go after Merck & Co's Keytruda, the world's top-selling medicine. 3SBio's drug works in the same way as a therapy from China's Akeso, which outperformed Keytruda in one trial. US-based Summit Therapeutics licensed Akeso's assets for US$500 million upfront in late 2022. Excitement These billion-dollar deals got bankers and investors excited. The Hang Seng Biotech Index is up about 60 per cent this year. By comparison, the S&P biotech index is down 6.5 per cent. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up There are good reasons to believe this rapid pace of dealmaking and enthusiasm for China biotech will last, with US President Donald Trump's economic policies serving as a major catalyst. Trump's threats to slash US prescription drug costs by '59 per cent, PLUS', as well as Medicaid and Medicare cuts in his big, beautiful tax and spending bill, will inevitably dent Big Pharma's bottom line. To cut in-house R&D expenses, these multinationals might have to come to China, where early-stage human tests are much cheaper and easier to run, despite comparable safety protocols. So far, the biotech industry is relatively insulated from Trump's tariffs, providing a meaningful safe haven for global investors. Rare earths materials and Boeing plane deliveries might be used as negotiation tools, but Beijing is making an exception for public health. It continues to welcome American-made medical supplies, including Pfizer's lung cancer drug Lorbrena and Merck's Gardasil, a HPV vaccine that protects against cervical cancer. Being in Beijing's good books allows Big Pharma to seal licensing deals with local partners. In addition, global drug companies and venture capital funds might want to take equity stakes too, just like Pfizer did last month. With a dip in biotech funding, especially in China, startups are unable to advance drugs on their own, and therefore demand large upfront licensing payments. This gives Western companies leverage to negotiate good deals. What is innovation without human talent? China's 'engineer dividend' is likely to pay off big time in the next few years, propelled by a hostile White House that vows to 'aggressively revoke' visas of Chinese studying in 'critical fields'. Already, the number of Chinese students in the US has dropped 22 per cent from its pre-pandemic peak, with many pointing to anti-Asian sentiment during Covid as a major drawback. Going forward, more could be forgoing US university degrees and working for promising startups at home instead. Between 2000 and 2020, the number of engineers in China ballooned from 5.2 million to 17.7 million, according to the State Council. The discipline and medicine are among the most popular fields for graduate studies. Those under the age of 30 account for 44 per cent of the total engineering pool, versus 20 per cent in the US, according to data compiled by Kaiyuan Securities. As a result, compensation for researchers is only about one-eighth that in the US. In other words, Chinese engineers are young, cheap and abundant. Tailwinds So what we've got are a lot of tailwinds: A group of strategic buyers eager to cut expenses and outsource research, a relatively benign local authority, and competitive talents. China's biotech industry is starting to dazzle. BLOOMBERG
Straits Times
7 hours ago
- Straits Times
Writing was on the wall for loss-making Jetstar Asia, say analysts
Faced with rising costs and intense competition as it tried to claw its way back post-pandemic, the airline's eventual closure was unfortunate but unsurprising. ST PHOTO: CHONG JUN LIANG Writing was on the wall for loss-making Jetstar Asia, say analysts SINGAPORE – Even before the sudden announcement on June 11 that Jetstar Asia would cease operations on July 31 after more than 20 years of flying, the writing was on the wall for the low-cost airline. The Singapore-based carrier was already struggling to make consistent profits before Covid-19 brought aviation to a standstill, and it was in the black for only six years in all the time it had been in operation. Faced with rising costs and intense competition as it tried to claw its way back post-pandemic, the airline's eventual closure was unfortunate but unsurprising, industry analysts told The Straits Times. 'The airline never got its mojo back,' said Professor Alan Tan, who specialises in aviation law and politics at the National University of Singapore (NUS). While rivals like Singapore Airlines' budget arm Scoot ramped up flights and destinations, Jetstar Asia made a slow recovery. The airline today operates a fleet of 13 aircraft, down from 18 before the pandemic. It also does not fly to India and only has a single flight to China - both major aviation markets , Prof Tan noted. 'The problem of Jetstar Asia's lack of scale is all too apparent,' he said. Mr Alan Lim, a director at Alton Aviation Consultancy, noted that Jetstar Asia's capacity and traffic in 2024 was nearly half of the levels recorded before the pandemic. About 4 million passengers flew in or out of Singapore on the airline in 2019; in 2024, this figure fell to about 2.3 million. Analysts also said the airline's move to Changi Airport Terminal 1 to Terminal 4 in March 2023, which Jetstar Asia had initially resisted, did not help its cause. 'That probably exacerbated the issues that they already faced to begin with, as they lost the seamless connectivity that they had with parent airline Qantas,' said Mr Shukor Yusof, founder of aviation consultancy Endau Analytics. 'Covid-19 changed everything, and the suffering became more acute,' he added. With an increasingly crowded low-cost carrier market in Asia creating price pressure on established carriers, Mr Linus Benjamin Bauer, founder and managing director of aviation consultancy BAA & Partners, said Jetstar Asia 'lacked the scale, local dominance, and margin buffers of stronger low-cost carriers like Scoot or AirAsia'. Assistant Professor Awad Khireldin, who teaches aviation management at the Singapore Institute of Technology (SIT), said Jetstar Asia's closure seemed to be a calculated move, with Qantas focusing on more profitable ventures elsewhere. Rising costs Qantas and Jetstar Asia had cited 'unsustainable' costs as a major factor behind the latter's closure, as it impacted the airline's ability to offer low fares - a key part of its business model. At a briefing on June 11, Jetstar Group chief executive Stephanie Tully said cost increases have been seen across the 'whole ecosystem', Bloomberg reported. 'The airport fees are a part of that. That has had an impact on the business,' she told reporters. Airline and passenger fees at Changi Airport, where Jetstar Asia is based, were hiked in April, and they will be raised further until 2030 to fund a S$3 billion upgrade of the airport's existing terminals. However, in response to Bloomberg's report, airport operator Changi Airport Group (CAG) said these airport charges are applied equally to all carriers and constitute a small component of airlines' total operating cost. Despite the fee hikes, CAG said it has been working proactively with airlines including Jetstar Asia to enhance productivity and cost-efficiency. The operator also pointed to joint marketing efforts with Jetstar Asia over the years to stimulate demand and said it has worked with the carrier to identify new route opportunities. But some analysts such as SIT's Prof Awad said Jetstar Asia's complaints about rising costs are valid. He noted that costs in S ingapore - from fuel to airport handling and security - have risen sharply and have doubled in some cases. 'Given the scale of these hikes, other airlines at Changi Airport could be affected too. This raises valid questions about whether Changi Airport should reconsider its current fee structure,' he added. Mr Mayur Patel, head of Asia at aviation data consultancy OAG Aviation, noted that AirAsia had also cited similar issues of high landing fees and passenger charges as the reason for cutting capacity on some of its routes out of Singapore, for instance to Bangkok and Phuket. Effects on Changi? Analysts said Jetstar Asia's exit will leave a void at Changi Airport, particularly at T4, where it is the anchor operator. This means a reshuffling of carriers within the airport could be on the cards, and other low-cost or regional carriers could potentially be moved in to ensure T4 remains operationally viable. Jetstar Asia's closure will also dent Changi Airport's connectivity, at a time when the air hub is looking to grow its number of air links, from more 170 cities today to more than 200 in the mid-2030s. This is especially given the amount of transit traffic that Jetstar Asia facilitates, via its interline and codeshare agreements with more than 40 carriers, including Emirates and KLM. Noting that Jetstar Asia's routes today make up 5 per cent of the flights at Changi Airport, Mr Mayur said replacing this will take time, especially in the current environment where planes and crew are hard to come by. But he believes this also presents an opportunity for other carriers to expand and take over Jetstar Asia's landing and take-off slots, especially those during morning and evening peak hours, which are coveted and hard to secure. Prof Awad had a similar view, noting that Scoot, and foreign budget carriers like AirAsia and Vietjet, could step in. CAG said the take-off and landing slots that are returned by Jetstar Asia will go back to the pool for reallocation. 'The slots will be allocated to support Singapore air hub's connectivity, while taking into account Changi Airport's capacity considerations, as well as in accordance with the Worldwide Airport Slot Guidelines,' it added. With Jetstar Asia's closure, Singapore Airlines Group's two carriers will be the only ones left that are based in the city-state. But analysts generally agreed that there is sufficient competition from foreign airlines to keep the national carrier on its toes. Still, NUS' Prof Tan said there will likely be a net reduction in competition, which will affect pricing and service frequency. Prof Awad said the absence of a third homegrown carrier also reduces market diversity , which may prompt the Civil Aviation Authority of Singapore to consider granting a new airline licence, if a credible applicant emerges. The future of low-cost carriers The International Air Transport Association's Sheldon Hee said Jetstar Asia's closure highlights the challenging nature of the airline industry. The regional vice-president for Asia-Pacific at the global trade body representing 350 airlines noted that the net profit margin for Asia-Pacific carriers is expected to be 1.9 per cent in 2025 - a 'very thin buffer', he added. 'With margins this low, any cost increase can impact an airline's viability,' Mr Hee added. Mr Bauer expects more market exits or strategic retrenchments, especially in fragmented, over-served low-cost markets like South-east Asia. 'Carriers without scale, strong backing, or network differentiation are most at risk,' he said. But Jetstar Asia's exit does not mean that Singapore is not a viable market for budget airlines, said Alton Aviation's Mr Lim. While Singapore is a high-cost market, there is a strong level of demand here compared to elsewhere in the region, he noted. NUS' Prof Tan agreed that there is still demand for budget flights. He added: 'I am confident that the leading foreign low cost-carriers like AirAsia, Cebu Pacific and VietJet will continue their operations here, but increasing costs may mean that cheap fares on some routes can no longer be taken for granted.' Kok Yufeng is a transport correspondent at The Straits Times. Vanessa Paige Chelvan is a correspondent at The Straits Times. She writes about all things transport and pens the occasional commentary. Join ST's WhatsApp Channel and get the latest news and must-reads.
