ANZ Profit Jumps 70%|Darker Warning Hidden Inside

ANZ's Hidden Warning

Australia's biggest bank just posted a 70 percent profit jump, and the same morning its CEO warned the world is entering an economic crisis that hasn't started yet. That is not a contradiction — it is a sequence. ANZ's $3.78 billion cash profit for the March half reflects what happened before the Iran war fully took hold. The warning is about what comes next.

ANZ chief executive Nuno Matos was direct on the analyst call. He said this crisis is still at the beginning. The bank's operating costs fell 22 percent, driven by deep job cuts and the final stages of integrating Suncorp Bank. That cost discipline is the reason the profit number looked strong. Revenue, however, was flat. Net interest income actually declined 2 percent. The profit engine was efficiency, not growth. That matters because efficiency gains run out. Revenue pressure doesn't.

The detail investors should focus on is the $175 million provision the bank set aside specifically for the Middle East conflict — on top of normal provisions. Westpac and NAB made similar moves in the weeks prior. When three of Australia's four largest banks simultaneously set aside buffers for a single geopolitical event, they are signaling a shared risk assessment. ANZ's provision was smaller than rivals, which Citi analyst Thomas Strong noted, but he added ANZ's coverage appeared adequate given its current loan book quality.

Matos laid out what ANZ is watching: road traffic, discretionary consumer spending, and whether large corporate clients start drawing on their credit lines. None of those signals have moved materially yet. Hardship levels are unchanged. Business borrowing behaviour is normal. But Matos was careful to say it is too soon to conclude anything. The bank is watching leading indicators, not lagging ones, and the leading indicators have not cleared.

The conditional path from here is narrow. If the Strait of Hormuz remains constrained and oil stays elevated, the inflation shock becomes a supply shock — slower growth, weaker earnings, rising loan losses. ANZ is priced for the first scenario to pass. If it doesn't, the 70 percent profit headline becomes the last clean number for several halves.

Coles vs. the Supply Chain

While the banking sector navigated a profit half shaped by events before the crisis, Coles delivered a quarterly sales report shaped entirely by events during it. Total group sales for the 12 weeks to late March reached $10.7 billion, up 3.1 percent. Supermarkets grew 4 percent, with comparable sales up 3.6 percent. Importantly, Coles said that growth was above-market — meaning it was gaining share from competitors, not simply riding a rising tide.

The mechanism behind the numbers is worth examining. Coles noted elevated demand for pantry staples in March, linked explicitly to geopolitical uncertainty in the Middle East. Consumers stocking up on shelf-stable goods pushed volume higher. That is a crisis-driven demand pattern, not organic growth. It flatters the quarter but may not persist if anxiety abates — or may intensify if supply chains tighten further.

The problem Coles flagged sits on the other side of the ledger. Supplier cost price increase requests have risen. Fuel, freight, and packaging costs are all climbing inside Coles' own operations. These are the direct transmission channels from oil prices into grocery margins. The CEO, Leah Weckert, stopped short of announcing price rises but confirmed the pressure is building. She said the company is actively managing it and aims to mitigate where possible.

Coles shares fell on the day of the announcement before recovering. The initial read was that the warning on supplier costs offset the beat on sales. That is the correct read, but the market appears to have settled on the view that Coles' pricing power — built through its own brand portfolio and its 10.3 million Flybuys members — provides enough of a buffer for now. Woolworths, by contrast, continued its slide. Morgans upgraded Woolworths in the morning; by market close, shares were still lower.

There is a tension embedded here that doesn't resolve cleanly. Coles' eCommerce sales rose nearly 25 percent in the quarter. That is a structural shift in how Australians buy groceries, and it tends to compress margins relative to in-store. If supplier costs rise at the same time online penetration grows, Coles faces margin pressure from both directions simultaneously. The quarterly sales number obscures that dynamic. The next half-year result will make it visible.

The ASX Recovers — and the Risk That Breaks It

The ASX 200 snapped an eight-day losing streak on Friday, closing up 0.74 percent. That was the longest run of consecutive losses in eight years, and the bounce was real — ten of eleven sectors rose, with 71 percent of ASX 200 stocks finishing higher. But the index is still down 0.65 percent for the week and effectively flat for the year. The recovery stopped the bleeding; it did not change the wound.

The materials sector led the bounce, driven by lithium price strength and a 2 percent overnight move in gold. Rio Tinto and BHP each added more than 2 percent. Uranium names moved sharply higher, with Boss Energy, Paladin, and Deep Yellow up between 2 and 4 percent. Energy stocks were mixed — uranium rallied, but Woodside fell 1.6 percent after Reuters reported it is struggling to attract long-term offtake customers for its Louisiana LNG plant. That is a structurally significant detail: Woodside is asking for a premium over US domestic LNG competitors, and buyers are not meeting that price.

The two threads running through today's session — the oil shock from the Iran war and the Woodside difficulty selling LNG — point at the same underlying force. Energy markets are in a supply-disruption phase, not a demand-growth phase. Producers whose value thesis depends on sustained high prices are exposed if geopolitical resolution arrives faster than expected. Woodside is the clearest example on the ASX.

Qantas sits on the opposite side of that exposure. The airline extended its domestic capacity cuts by three months, pushing them through to September. International capacity will decline further into early 2027. Trans-Tasman flights are being trimmed. The $800 million fuel cost blowout disclosed in mid-April is now reshaping route strategy, not just short-term pricing. Qantas has added 2,000 seats per week to European routes — redirecting capacity toward long-haul where fuel is a smaller share of ticket price — while pulling back from routes where it cannot pass through the fuel cost increase.

The forward path for the ASX hinges on a single variable: how long the oil supply constraint persists. The weight of evidence points toward a market that is pricing in a shorter disruption than the physical reality may deliver. ANZ's provision, Coles' cost warnings, Qantas' route cuts, and Woodside's contract difficulty are all consistent with a supply shock that has more duration in it than equities have priced. If the Strait of Hormuz constraint eases in May, the recovery that began today has room to extend. If it doesn't, Friday's bounce will look like the first of several false starts. The benchmark to watch is whether China resumes jet fuel exports at scale — it signaled willingness this week, and confirmation would be the first concrete reversal signal in the oil supply chain.