SYDNEY - ANZ Group Holdings announced that its annual net profit for the year remained flat compared to the previous year. Despite the impact of higher interest rates on economic activity, the Australian major lender increased its dividend.
The bank reported a statutory profit of 7.1 billion Australian dollars (US$4.51 billion) for the 12 months ending in September, falling short of analysts' expectations of A$7.21 billion according to FactSet's consensus estimate. However, cash earnings, a measure tracked by analysts that excludes non-core items, saw a 14% increase to A$7.41 billion.
ANZ Group Holdings' Chief Executive, Shayne Elliott, acknowledged the difficult external environment and emphasized the importance of maintaining a strong balance sheet in anticipation of continued challenges such as high interest rates, rising costs, and geopolitical tensions.
With a Common Equity Tier 1 capital ratio of 13.3%, up 105 basis points from the previous year, ANZ Group Holdings demonstrates its ability to withstand financial shocks. The bank has also retained credit provision overlays to counter increased risks associated with rising inflation, higher interest rates, and geopolitical tensions. At the end of September, the lender's credit provision balance stood at A$4.03 billion.
ANZ Group Holdings' net interest margin, a key indicator of profitability, increased to 1.70% compared to 1.63% in the previous year.
In summary, despite a flat net profit, ANZ Group Holdings remains resilient as it anticipates ongoing challenges in the external environment. The bank's focus on strengthening its balance sheet and retaining credit provision overlays provides a solid foundation in the face of high interest rates, rising costs, and geopolitical tensions.
ANZ Reports Strong Performance Amidst Rising Interest Rates
ANZ, like other lenders, has been able to capitalize on the current rising interest rate environment in Australia. The recent decision by the Reserve Bank of Australia to raise its official cash rate to 4.35% has provided a favorable tailwind for net interest margin and profit. This rate hike was the first since July and came as a result of higher-than-expected inflation in the third quarter.
However, some analysts warn that Australian lenders may soon face challenges in terms of earnings growth. The positive impact of interest rates on profitability is expected to slow in fiscal 2024 and beyond. Additionally, customers are grappling with higher mortgage repayments and increasing costs due to inflation.
In light of these factors, ANZ has declared a final dividend of A$0.94 per share. This consists of an A$0.81 dividend partially franked at 65%, along with an additional one-off unfranked dividend of A$0.13. This represents an increase compared to the A$0.74 dividend paid out the previous year.
The decision to offer a lower level of franking credits was influenced by the "geographically diverse nature" of ANZ's business, as well as the timing of its proposed acquisition of Suncorp's bank. Acknowledging that this move may not have been anticipated by all shareholders, ANZ justified the one-off unfranked dividend as appropriate due to its strong performance.
Meanwhile, ANZ is actively preparing to integrate Suncorp's bank into its operations. The bank is awaiting a decision from the Australian Competition Tribunal, which is expected to be made in February, regarding the approval of the acquisition.
Overall, ANZ remains optimistic about its performance and its ability to navigate the evolving financial landscape. As interest rates continue to fluctuate, ANZ is positioning itself strategically to support its customers and drive sustainable growth.
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