ANZ ALL CASHED UP
ANZ bank shareholders look set for a windfall as the lender mulls what to do with the cash it is raising by selling off various parts of the business.
ANZ lifted its full-year profit 18 per cent to $6.94 billion, and while it expects a $310 million earnings hit in 2017-18 due to the divestments, it is looking at capital management options as it pockets the proceeds and refocuses on domestic retail banking.
The cash profit was roughly in line with expectations, while net profit, which includes oneoff items and other charges, rose 12 per cent to $6.41 billion, from an impairment-heavy 2015-16 result.
Chief executive Shayne Elliott said ANZ’s healthy capital position meant a buyback was a possibility as the bank offloaded Asian operations along with superannuation and potentially its life insurance business in Australia and New Zealand.
“There’s no real incentive for us to sit on lazy capital,” Mr Elliott said yesterday.
“So when we do get those proceeds — and we haven’t really received that money from any of those sales just yet — when we do, we would be in a position to consider returning that to shareholders.”
ANZ has cash to play with after it lifted its common equity Tier 1 capital ratio 0.96 percentage points over the 12 months to September 30 to 10.6 per cent.
That’s above the 10.5 per cent “unquestionably strong” benchmark the Australian Prudential Regulation Authority has told banks to reach by 2020.
Nonetheless, analysts had expected some form of capital management for some time. Net interest margin — the difference between the price of loans and the cost of funding them — fell from 2.07 per cent to 1.99 per cent over the year, partly due to the Federal Government’s bank levy.
Patersons economic strategist Tony Farnham said the result was rescued by a drop in bad debt expenses, while Citi analysts cited weaker second- half revenue growth in downgrading ANZ’s stock to neutral from a buy.
“We believe the path management is taking is the right one, but the benefits of this seems slower to emerge and investors can afford to seek other opportunities for now,” Citi said in a note.
Operating income fell 1 per cent to $20.27 billion and Mr Elliott said revenue growth was getting harder to come by amid increasing competition for consumers.
“That’s why we have been transforming ANZ, getting ready for that,” Mr Elliott said.
“Really making sure that we put our resources — whether they are intellectual resources, our financial resources — to work where we can make a difference and we can win.”