Reporter's view: ANZ is just different
Make us a preferred source
Make us a preferred source on Google
Reporter's view: Andrew Cornell, associate editor, banking and finance, writes:
ANZ shares sold off steeply on the announcement of a slightly worse-than-expected interim result but recovered ground during the analyst briefing as management worked through the details.
CEO Shayne Elliott, not unexpectedly, argued the market doesn’t appreciate the value in the bank and how different it is to its major bank peers.
The difference lies in its business mix — the big driver of the result today was the Institutional bank. That’s not lending to big corporates — historically risky — but rather undertaking transaction banking, cash management and market trading activity on behalf of sovereigns, other banks and highest credit quality corporates.
When it comes to retail banking — which ANZ hopes to beef up in buying Suncorp Bank — Elliott reckons his bank is closer to Bendigo and Adelaide Bank than market leader Commonwealth Bank.
Analysts were certainly more interested in retail, although more now about the emerging ANZ Plus digital platform which is growing strongly and will eventually support ANZ’s existing customers and Suncorp’s.
Elliott says ANZ is now on a track with mortgages with which it had a systems meltdown for a couple of years, but the great attraction of Suncorp in the current climate is actually deposits.
ANZ suffered in comparison with National Australia Bank and Westpac’s well-received earnings, with Jarden noting its result was “slightly disappointing given elevated expectations from the market after peers' results”.
E&P says there could be a downgrade to the market’s core profit forecasts given margin pressure and higher costs.
ANZ shares dip after mixed first-half results
The news: ANZ shares dipped at the start of trading after the big four lender reported a 7% drop in first-half cash profit compared to the prior corresponding period.
Shares were down 1.1% to $28.43 by 11:00am AEST.
E&P Capital analysts said the bank's first-half core profit missed its estimates due to costs coming in higher than expected. While revenue was broadly in line with expectations, they said it was assisted by an "exceptionally strong" half for markets.
Meanwhile, the analysts noted that cash earnings of $3.55 billion were broadly in line with expectations due to a low credit impairment charge. However, they anticipated a possible 1% to 2% downgrade to consensus core profit forecasts until the 2026 financial year, driven by lower net interest margin (NIM) — which fell nine basis points to 1.56% — and higher costs.
Elsewhere, Jarden analysts said it was a "slightly disappointing" result, especially given heightened optimism following results from its big four peers, with headline NIM "a big miss to expectations". They noted that the $2 billion buyback was a key position as it was potentially larger and earlier than some investors had expected.
UBS analysts said that ANZ's institutional business continued to be an "attractive investment underpin and differentiator", while the buyback, continued integration with recently acquired Suncorp Bank, and the prospect of further capital return were positives.
ANZ also remained the least exposed bank to structural headwinds to retail bank profits due to its mix dynamic, UBS said, and was the analysts "preferred pick" among the major lenders.
ANZ posts 7% profit downturn, unveils $2b buyback
The news: ANZ reported a decline in first-half cash profit and announced a $2 billion share buyback.
The numbers: The big four lender posted a $3.55 billion interim cash profit, a 7% fall compared to the prior corresponding period.
It also announced a $2 billion share buyback and declared an interim dividend at 83 cents per share, partially franked at 65%. The bank a year ago paid a dividend of 81 cents per share, fully franked.
ANZ's shares last closed at $28.77 and over the last 12 months has risen 20.73%.
In March, ANZ sold a 16.5% stake in Malaysian lender AmBank, releasing $668 million in capital which will be returned to shareholders via the buyback.
The context: ANZ said the group made "good progress" on key priorities during the half, including preparing for the integration of Suncorp Bank, growing its new mobile app offering ANZ Plus, leveraging its institutional processing platforms, and driving further productivity.
It said its preparations to integrate recently acquired Suncorp Bank are "well advanced" despite taking "longer than anticipated" to progress the necessary approvals.
What they said: The bank's CEO Shayne Elliott said: "Both the domestic and international environments are expected to remain challenging across the remainder of the year. The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally."
The sources: ASX announcement, ASX announcement, E&P Capital research, Jarden research, UBS research
