ANZ’s FY Profit Flat, Increases Dividend — Update

Cash earnings–a measure tracked by analysts that strips out non-core items–rose by 14% to A$7.41 billion.

Chief Executive Shayne Elliott said the external environment is likely to remain challenging.

“We continued to strengthen our balance sheet and closed the year with provisions for potential credit losses higher than prior to the pandemic, and with more capital than ever before,” he said. “This is critical as we enter a period of continued high interest rates, rising costs and geopolitical tensions.”

ANZ’s Common Equity Tier 1 capital ratio–a key measure of a bank’s ability to withstand financial shocks–was up 105 basis points for the year at 13.3%.

ANZ said credit provision overlays for increased risks associated with rising inflation, higher interest rates and increased geopolitical tensions have been largely retained. The lender’s credit provision balance at end-September was A$4.03 billion.

Net interest margin–a key profitability indicator–was 1.70%, compared with 1.63% a year ago.

ANZ, like other lenders, has benefited from the rising interest rate environment. The Reserve Bank of Australia last week raised its official cash rate by 25 basis points to 4.35%, marking the first hike since July, following the news of higher-than-expected inflation in the third quarter.

But some analysts believe Australian lenders may soon struggle to grow earnings much, as the rates tailwind for net interest margin and profit is likely to slow into fiscal 2024 and beyond. At the same time, customers grapple with higher mortgage repayments and inflation-related cost squeezes.

The bank declared a final dividend of A$0.94 per share, comprising an A$0.81 dividend partially franked at 65% and an additional one-off unfranked dividend of A$0.13. This compares with A$0.74 a year earlier.

On the level of franking credits, ANZ said it reflected the “geographically diverse nature” of its business, as well as the timing of the company’s proposed transaction to acquire Suncorp’s bank.

“The board recognized that lower franking may not have been anticipated by some shareholders. In recognition of this, and given our strong performance, the board agreed that the one-off unfranked dividend was appropriate,” said ANZ.

The lender said it continued preparations to integrate Suncorp’s bank while it waits to hear if the Australian Competition Tribunal will allow the deal to proceed. It expects the tribunal to decide the fate of the deal in February.

Write to Alice Uribe at [email protected]