ANZ reports 40% drop in net profit in FY20, Share price down in trade

  • October 29, 2020 02:51 PM AEDT
  • Team Kalkine
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ANZ reports 40% drop in net profit in FY20, Share price down in trade

Summary

  • ANZ declared a 35 cents per share final dividend for shareholders, due for payment on 16 December. 
  • Full-year profits are down 40% compared to the previous corresponding period. 
  • At the end of the year, ANZ’s Level 2 CET 1 ratio was 11.3%. 

Australia and New Zealand Banking Group Limited (ASX: ANZ) reported a statutory profit after tax of $3.58 billion in FY20, down by 40% compared to the previous year. Cash profit for the year was $3.76 billion. It has now declared total dividends of 60 cents per share for the year FY20. 

The 40% fall in profits was primarily driven by rising total provision charge, which increased to $2.74 billion compared to just $795 million in FY19. 

ANZ Chief Executive Shayne Elliott stated that 2020 is a challenging year, and the bank has a strong balance sheet, record levels of capital, and provisions for expected future loan losses. 

He stated that the bank recorded above system growth in the owner-occupied segment of home loans in Australia. ANZ also moved to online banking services as the pandemic accelerated take-up of digital services. 

Dividend

ANZ declared a final dividend of 35 cents per share (fully franked), which would be paid to shareholders on 16 December 2020. After deferring its interim dividend at the half-year result, the bank resolved to pay a 25 cents per share dividend in August. 

As a result, the bank has now declared 60 cents per share for FY20, well below total dividends of 160 cents in the previous year. It is mainly due to prudent capital management and adherence to guidelines on dividends. 

It was understood that the bank’s underlying profitability enabled it to declare a 35 cents final dividend for the shareholders. ANZ continues to operate a Dividend Reinvestment Plan and Bonus Option Plan for the shareholders. 

Image Source: © Kalkine Group 2020

Image Source: © Kalkine Group 2020

Operational performance

In Australia, the bank has over 1 million home loan accounts and around 95k took deferrals. As of mid-October, ~55k accounts completed deferrals, of which 79% are returning to full payment, 20% are going with further deferral, and 1% have applied for loan restructuring. 

Half of the customer accounts left with active deferrals have money for at least three months payment, and a quarter of those have made at least one payment while being on deferral. 

In Australia Commercial portfolio, close to 10% or 23k of its customer accounts took up deferral on business loan repayments. Around 15k accounts have completed their deferral or given their advice to the bank, of which approximately 1,600 accounts received a four-month extension. 

In New Zealand, the bank has over 529k home loan accounts and around 24k accounts were on deferrals. As of mid-October, only 10k accounts are on a deferral, representing 2% of the total New Zealand mortgage book. 

ANZ increased core lending to institutional clients and clocked $16 billion in the first half ended March 2020. Since global conditions have improved, many clients have paid down, and core lending fell $17 billion in the second half. 

Credit Provision

In the second half, the bank incurred a provision charge of $1,064 million after a charge of $1,674 million in the first half of FY20. In 2H20, the bank provided $395 million to individually assessed provisions and $669 million was collective provision. At the end of the year, collective provision balance was $5,008 million. 

On 29 October 2020 (AEST 2:35 PM), ANZ traded at $18.6, down by 2.923% from the previous close. 

 

 


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