ANZ profit increases despite stable home loans

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ANZ Bank’s new CFO, Farhan Faruqui, described the loss of mortgage momentum as “the number one priority for the entire executive committee.” ANZ Data Manager Emma Gray has been seconded to lead the operations team to lead process improvement.

ANZ Banks shares rose 32 ¢ or 1.1% to $ 28.71 to open on a lower day for bank stocks and stocks in general.

With all banks under pressure to keep costs under control given the headwinds in revenue – and with some analysts questioning whether ANZ can meet its ambition to cut the overall cost base to $ 8 billion – spending has edged up slightly. increased during the year, but according to plan, to $ 8.67 billion, from $ 8.65 billion in 2020.

This included an additional investment of $ 360 million, including in a new savings product offering and a digital platform called ANZx. ANZ estimates that productivity increases saved about $ 308 million during the year.

“I see it as a rhythm,” said TS Lim of Bell Potter.

“Net interest and other income has improved a lot, and despite higher expenses and credit charges, ANZ has consistently exceeded my forecast by 6%.”

Higher dividend, uncertain future

Mr Elliott said ANZ has enjoyed a favorable credit environment, but is ready to face an uneven path to recovery as the country opens up. The collective allowance maintains a balance of $ 4.195 billion, more than $ 819 million more than it was before COVID in September 2019. Mr. Elliott said “the actual impacts of COVID-19 will not be not fully understood until at least the end of 2022 “.

“We recognize that the outlook remains somewhat uncertain, and we have over $ 4 billion in credit reserves if conditions deteriorate,” he said. “It’s great that vaccination rates and other things are going up, but it’s a living, mutant organism, so it’s certainly not over yet.”

ANZ will pay a fully franked dividend of 72 for the second half of the year, continuing on the track established in May with a larger payout. That brings its annual dividend to $ 1.42, up 137% from 2020 after the prudential regulator ordered payments to be reduced to act as a buffer for COVID-19 bad debts that never materialized.

As the pandemic struck in 2020 and banks were urged to keep their capital, ANZ paid a deferred dividend of 25 in the first half last August and a second half of 35 in December.

The bank’s Tier 1 (CET1) common stock ratio rose 100 basis points during the year to 12.34 percent, 20 basis points higher than the 12.2 percent announced during the third quarter update in August. The figure equates to more than $ 6 billion in capital above the prudential regulator’s definition of “unmistakably strong.”

“We’re here for the long haul and the most important thing we can do is protect the bank and make sure our balance sheet is really strong and strong,” Mr. Elliott said in an interview with the bluenotes website form the bank.

“And coming back to the uncertainty I talked about before, when it’s good to be optimistic – and we are – it’s always uncertain and so you want to have that ballast, you want to have that strength. a strong balance sheet, a lot of capital, a lot of credit reserves, and that is precisely where we are today.

New Zealand stands out

ANZ’s net interest margin – a common measure of profitability that measures the difference between interest paid and interest earned – increased 2 basis points in continuing operations during the six-month period to 165 basis points.

Performance in New Zealand, where the bank dominates market share, was particularly strong, with mortgage lending increasing 11% overall. Profit after tax increased 41 percent. Mr Elliott said New Zealand was “on the go”.

The institutional bank reported a 19 percent drop in half-to-half income on a fixed loan balance. Cash profit during the year remained stable, while institutional deposits increased by 7 percent.

Mr Elliott said the institutional bank is best positioned among ANZ’s competitors to finance the transition to a net zero economy by 2050, given its expertise in lending to large resource projects and offering sustainable financing.

“Sustainable finance will be one of the megatrends that will impact the global economy in the coming years,” he said.

The net provision reversal of $ 567 million includes a collective provision reversal of $ 823 million and an individual charge of $ 256 million. It follows the net release of $ 150 million in provisions in the February semester.

The reductions in provisions reflect customers who are managing their obligations to the bank well during the pandemic, aided by extensive government support programs. In 2020, at the height of the crisis, the bank recorded a charge of $ 2.7 billion.

ANZ Plus

Mr Elliott also offered investors their first relevant update on ANZx – which will hit the market in the coming months as ANZ Plus.

The bank has around 800 employees working on the project in a separate building – moving away from the mother ship and accelerating the pace of innovation – with offerings aimed at home customers and small businesses soon to be rolled out, focused on “financial well-being”. It will allow ANZ to develop new offerings around insurance, investments and philanthropy.

“It’s fintech in its capacity and the way it operates, but with the brand of an ANZ behind it and the capacity and strength of our track record,” Mr. Elliott said.

ANZ said 49% of all retail product sales in Australia, including home loans, now go through digital channels, up from 40% in fiscal 2020.

He said requests for a new automated business lending product, ANZ GoBiz, have averaged 2,900 each month since its launch in May.


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