ANZ shares drop as Matos says economy could turn ‘nasty’
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More news: ANZ shares have fallen by around 1.6% in early trade following the release of its first-half results, as chief executive Nuno Matos contemplates the macroeconomic outlook and global disruptions.
Around 10:40am the bank’s share price dropped 62 cents to around $36 as Matos said ANZ as a global bank had a front row seat to supply disruptions.
“This crisis is still at the beginning, to be honest,” Matos said. “It takes some time to really unfold. Hopefully it will not, but we can’t rule out a more nasty environment.”
Chief financial officer Farhan Faruqui said, under ANZ’s economic base case, risk weighted assets would increase by $3 billion, representing 7 basis points of capital, as the bank braced for its impacts.
“We don’t have a downside scenario assumption, but I would imagine obviously it’ll be much higher than $3 billion,” he said.
It looks like the bank however is reasonably well positioned. Analysts reflected on a resilient result from ANZ which beat market expectations on costs and credit provisions.
“ANZ delivered a solid 1H26 result, positioning the bank well to navigate heightened uncertainty stemming from the conflict in the Middle East, which is contributing to renewed inflationary pressures and higher interest rates,” Moody’s Ratings senior credit officer Daniel Yu said in a note on Friday.
“Looking ahead to 2H26, further cost efficiencies and margin support from additional rate increases will partially offset competitive pressures — particularly in home lending — as well as the risk of rising credit losses as borrowers face increased financial strain amid higher rates and a softer economic environment,” he said.
It came as Matos faced questions from analysts about how ANZ would grow as it focused on margins at the expense of its top line. He said the bank won’t chase growth at the expense of margin.
“We don’t do discounts across the board. We are not anymore the cheapest in the market. We changed our competitive stance, and we will keep it that way for the future. Because again, as we’ve been saying, we are targeting sustainable and profitable growth,” Matos said.
“Undoubtedly our revenue will improve, but they have to be accretive. They have to deliver good returns. That’s our ambition and that’s our commitment. To be honest, the consensus of the market is agreeing with us,” he said.
Jarden analyst Matt Wilson complimented the result but said more detail was required on how Matos would deliver on his ambitious targets.
“ANZ aspires to extend and leverage leadership in Institutional and NZ banking whilst closing gaps in Australian Retail and Business. We need clarity on approach here,” he wrote in a note to clients.
ANZ interim cash profit jumps to $3.78b as cost cuts drive turnaround
The news: ANZ has reported a first half cash profit of $3.78 billion, up 14% on the previous half excluding significant items, as bank profitability improves in the midst of a major transformation.
The numbers: ANZ managed to grow revenue by 3% to $11.2 billion while cutting costs by 22% to $5.53 billion.
It cut the bank’s cost to income ratio drastically to 49.4%, boosting return on equity from 6.1% to 10.6%. The bank maintained its dividend at 83 cents.
At the same time ANZ’s balance sheet growth remains soft with deposits growing by just 3% to $771 billion as net lending actually fell 1% to $822 billion.
Following similar moves by rivals NAB and Westpac, the bank also increased its collective provisions, recording a credit impairment charge of $274 million (up from $141 million in the first half of last financial year) and increasing its coverage ratio by 4 basis points as it closely watches supply chain shocks.
ANZ’s common equity tier one ratio rose 34 basis points to 12.39%. Group net interest margin fell 1 basis point to 1.53%, with the bank blaming intense home lending competition and a tougher market environment.
What they said: In comments released to the market, ANZ chief executive Nuno Matos said his strategy of first resetting the bank’s foundations to then outperform the market was paying off.
“We are already seeing the benefits of what we’ve been executing. We have been executing margin management to a much better level. Cost management is at a great pace,” Matos said.
“We have reduced costs by 9% half on half, our returns are materially higher, our cost to operate materially lower. We are very, very happy with how things are going.”
Chief financial officer Farhan Faruqui said the bank had now made 78% of its planned redundancies, letting go around 2,730 ANZ employees with another 770 to go by September. It had also cut 1,000 consultants from the bank with ANZ looking for more savings by cutting its third party spend.
“All taken together, we have delivered $392 million of an $800 million full year target of productivity that we had committed to investors, so 49%, at the end of the half,” Faruqui said.
“And because we think we’re progressing faster than we had anticipated we are actually increasing the guidance that we’re going to make that $800 million closer to delivering $875 million for the full year, and that will help us overall,” he said, adding the bank was now guiding a 5% reduction from last year’s cost base instead of 3%.
ANZ said its Suncorp integration was “on track” at about a third completion, with the migration expected to be completed by June 2027.
The source: ANZ
