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The September quarter inflation figures released this week showed consumer prices rising at their fastest pace in 32 years,taking the annual inflation rate to 7.3 per cent. Economists have revised their predictions following the data,tipping higher rate rises when the Reserve Bank meets next week.

Elliott said it was hard to predict where rates will go,but 70 per cent of ANZ’s 1 million home loans customers are ahead on their repayments and have the capacity to deal with more rises.

“I believe that if rates go up ... the vast,vast bulk of customers absolutely will be able to keep up. Why? Because their pay is also rising fast. They’re ahead on their repayment. They have the biggest buffers on average they’ve ever had,” he said.

“I’m not delusional. I’m not suggesting there won’t be stress. I’m not suggesting some people won’t get into difficulty,but it’s a relatively small cohort.”

“I understand that will cause people pain,I mean,that’s a big number for people to absorb and people may have to modify their lifestyle and reallocate expenses...and it will be harsh for many.”

“But fundamentally,we think the majority of customers are well positioned to be able to work their way through with some tough decisions along the way,” Elliott added.

ANZ’s earnings were boosted by the rise in official interest rates,which helped lift the bank’s margins. The net interest margin - a key driver of profitability which compares banks’ funding costs with what they charge for loans - grew from 1.58 per cent to 1.68 per cent in the September half.

The improved margins helped deliver more than half of the bank’s $902 million jump in revenue from the first half to the second half of the year. The bank expects the rate environment to continue to be supportive for margins in the first half of the year.

Elliott noted that ANZ was back on track in its home loan business after a prolonged struggle with slow mortgage processing times,which failed to keep up with soaring demand during COVID-19.

ANZ chief executive Shayne Elliott says the bank’s home loan business has “restored momentum”.Credit:Peter Wallis

Morningstar analyst Nathan Zaia said margin improvement was critical for ANZ’s bottom line,and it was likely they would be up materially in 2023,with expectations that revenue will also grow strongly next year.

However,he added there were still question marks about the improvement in ANZ’s home loan processing.

“I think that’s probably the missing piece of the puzzle at the moment,I think that their commercial lending and institutional lending were quite strong,and provided a bit of an offset.”

Zaia said the market’s subdued reaction to ANZ’s results was likely attributable to the guidance that its expenses would increase,but he added that given its strong revenue,it made sense for the bank to step up its investments to improve its digital offerings.

“I think it does make sense to,instead of trying to keep some of that profit now,reinvest it in the business.”

UBS analysts said in a note that ANZ’s results had been stronger than expected,which they attributed to solid revenue growth thanks to the net interest margin expansion. However,they questioned how long ANZ can continue to benefit from deposit pricing gains.

Jarden’s chief economist Carlos Cacho said it was a solid result,which was driven by a combination of better margins and lower bad debts.

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