ANZ share price rises as $1.5 billion buy-back is greenlit

‘We consider an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment.'

After a difficult 2020, Australia’s big four banks have rebounded strongly. To illustrate that point, since January, the ANZ share price is up close to 20%.

Building on that momentum, the bank on Tuesday announced it intends to buy-back some $1.5 billion of its stock, on-market, as part of its capital management strategy.

The bank made a number of other important specifications in an adjacent market release, including:

  • Noting that the buyback program would likely commence on 3 August, 2021, while adding that the expectation is for it to be complete by July 18, 2022.
  • The broker(s) who would be assisting ANZ with the buy-back have yet to be determined.

The rationale

Commenting on the rationale behind the buy-back plan, ANZ Chairman – Paul O'Sullivan – said:

'Despite the very real challenges being experienced by many of our customers, we have the financial strength to continue to support our customers, while also returning surplus capital to shareholders.'

'After reviewing options, we consider an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment.'

The bank’s CEO – Shayne Elliott echoed a similar sentiment – saying:

'The strength of our balance sheet and ongoing financial performance means we are in a position to return a modest amount of surplus capital to shareholders through a buy-back of shares on-market.'

Implications of the buy-back

One key implication of this buy-back program would be a slight reduction in ANZ’s capital position, with the bank saying it expected its Capital Equity Tier 1 ratio (CET1) to decline by 35 basis points once the buy-back is complete.

ANZ, it should be noted, continues to tout a strong capital position and even after that 35 basis point decline, would continue to maintain a capital position in excess of APRA's ‘unquestionably strong’ requirements.

Off the back of this news, investors bid the ANZ share price higher, with the bank up around 1.4%, to $27.53 per share, by the afternoon session.

Regulatory intervention

ANZ’s $1.5 billion buy-back announcement comes as APRA on Monday revealed additional regulatory support to banks providing financial assistance to customers. This itself comes as Sydney and Victoria have recently been thrown into lockdown, exacerbating concerns around Australia’s economic outlook.

Nonetheless, the key point from the regulator was that authorised deposit taking institutions – such as ANZ – ‘will not need to treat the period of deferral as a period of arrears or a loan restructuring.’

Ultimately, this move from the regulator is aimed at increasing flexibility for the banks, with it further being noted that this regulatory support ‘will apply to loans that are granted a repayment deferral of up to three months before the end of August 2021.’

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