ANZ has launched a new margin loan to add to its existing standard variable product, aimed at encouraging investors to diversify their portfolio of shares against which the loan is leveraged.
The ANZ Diversified Margin Loan allows investors to borrow against over 1,000 ASX listed securities, more than twice the number available on its standard variable loan, which itself currently offers among the highest range in the market.
At the same time, the loan will offer investors loan-to-value ratios (LVRs) on most shares outside of the ASX top 50 stocks that are “significantly higher” than the bank’s standard product LVRs.
The higher LVRs permitted by the new loan also increase how far the value of a portfolio needs to fall before an investor would face a margin call.
To qualify for the new loan, investors must hold a portfolio of at least four stocks, with a cap of 25 per cent of the portfolio value placed on each stock.
Investors are penalised for breaching the restrictions by the bank applying the standard LVR to the excess proportion of the relevant stock.
Head of margin lending John Daley said the new loan was developed following research that reveals “a well-diversified portfolio reduces volatility without reducing long-term returns”.
Daley anticipated that some investors would “choose to borrow more to potentially enhance their returns, while others would use the product to increase their safety cushion before they face a margin call.
The new product was inauspiciously launched on the same day that the Reserve Bank increased the cash rate by 0.25 per cent, but Daley does not believe this will have any lasting adverse impact.
“Obviously any increase in the cost of money means people are less likely to take out a loan, but we expect that the impact of the rate hike on margin loans will be less than on other forms of lending.
“By definition this is a loan for investment purposes and therefore many customer will be able to deduct the cost of the interest.
“Customers on the top marginal interest rate, that means today’s rate hike is effectively only costing them 13 points on their margin loans,” he said.
It is targeted at investors who already hold a margin loan and also “very much aimed at investors in stocks as opposed to those who invest in managed funds”.
However, he expects the product to be “attractive to all channels, including planners, who are increasing putting customers directly into stocks, as distinct from managed funds”.
