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ANZ share price: what’s the outlook as cash profits fall 60%?

We examine some of the key details from ANZ’s first-half results release.

ANZ share price Source: Bloomberg

ANZ share price slumps as profits collapse

The Australia and New Zealand Banking Group (ANZ) delivered a weak but not unsurprisingly so set of first-half (H1) results to the market on Thursday, 30 April. Here, the commercially inclined bank revealed that its H1 profits had collapsed, that it would be deferring its interim dividend and that it would be recognising significant credit impairment charges as a result of the Covid-19 pandemic.

The market responded predictably to this announcement, with investors bidding the stock down as much as 2.1% within the first hour of trade.

First-half results at a glance

On the bottom-line, ANZ delivered a H1 statutory profit after tax of $1.545 million and a cash profit on a continuing basis of $1.413 million, representing a 60% decline on the prior corresponding period. Like NAB, ANZ noted that when excluding credit impairment charges, tax and a number of large notable items, its H1 profits were flat, down just 3% to $5.106 million.

ANZ's H1 return on equity came in at 4.7%, down significantly from the prior corresponding period.

Dividends deferred

Maybe most disappointingly for income-focused investors, ANZ today revealed that it would be deferring its interim dividend until further clarity around the economic outlook materialises.

Speaking to the decision to defer the bank’s H1 dividend, ANZ chairman, David Gonski said:

'This decision is not about our current financial position and ANZ has not received any concerns from APRA regarding our level of capital. The board agrees with the regulator's guidance that deferring a decision on the 2020 interim dividend is prudent given the present economic uncertainty and that making a decision at this time would not have been appropriate.'

Looking forward, ANZ said it would update investors regarding its dividend program as part of its August 2020 market update.

Impairments blow out as the outlook remains uncertain

Elsewhere, in the face of increasing economic uncertainty, ANZ today revealed that the bank had recognised a significant H1 credit impairment charge of $1.674 million.

‘The significant increase across all divisions are primarily due to forward-looking impact of material deterioration in the economic outlook due to the Covid-19 pandemic,’ the bank said.

The majority of these impairment charges were related to the increase allowance of 'expected credit losses'.

Looking at further indicators of stress, during the half, ANZ reported that around 105,000 Australians had requested home loan repayment deferral, on loans valued at approximately $36 billion.

By comparison, ANZ’s New Zealand division saw around 19,000 individuals request that their home loan repayments be deferred.

Speaking of the outlook, ANZ's chief executive officer (CEO), Shayne Elliot noted: 'The coming months will be difficult. The COVID-19 crisis has already evolved at such a pace it is difficult to predict how deep the economic crisis will be or how long the recovery will take.'

The ANZ share price last traded at $16.53 per share.

How to trade ANZ – long or short

What do you make of ANZ’s H1 results: are you bullish or bearish on the commercially inclined bank? Whatever your view, you can use CFDs to trade the likes of ANZ and the other big four banks – long or short through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) ANZ, follow these easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘ANZ’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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