Share buyback fear for investors
POSSIBLE fines and high costs related to customer remediation or restructuring could threaten the size of ANZ’s share buybacks, industry experts say.
According to analysts at investment bank Morgan Stanley, potential unknown costs resulting from the banking royal commission - including higher fines and changes to rules on balance sheet strength - could erode ANZ’s excess capital.
That mean the bank’s share buybacks would be lower than previously forecast, the analysts say in a report for investors. In June, ANZ announced a $1.5 billion share buyback that is only a quarter complete.
Companies often carry out share buybacks as a way of returning to investors funds that are deemed excess, and to support the price of their stock.
Morgan Stanley estimates ANZ will carry out another $3 billion worth of buybacks in the next two financial years.
“The current buyback is tracking behind our forecasts that assume $500 million is completed in the second half of 2018 and $1 billion in the first half of 2019,” the report says.
“We expect a further $3 billion of buybacks in the second half of 2019 and first half of 2020.”
It also said that ANZ’s excess capital would be reduced if it was used to fund restructuring and a reinvestment provision, or if there were changes to rules on balance sheet strength - potentially next year.