ANZ share price under scrutiny after reporting $6.5bn cash profit for FY22

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The Australia and New Zealand Banking Group Ltd (ASX:ANZ) The stock price will be watched this morning.

This follows the publication of the highly anticipated annual results of the banking giant.

ANZ share price on watch amid strong earnings

  • Statutory after-tax profit up 16% to $7,119 million
  • Cash profit from continuing operations up 5% to $6,515 million
  • Dividend per share up 3% to $1.46
  • CET1 ratio 12.3%
  • H2 Net Interest Margin (NIM) of 1.68%
  • 1.8% NIM output

What happened in fiscal year 2022?

For the 12 months ended September 30, ANZ announced a 16% increase in statutory profit after tax to $7,119 million and a 5% increase in cash profit from continuing operations to $6,515 million.

The latter follows a strong second half that saw ANZ’s cash profit rise 9% to $3,402m on the back of improvements to its NIM. ANZ’s second-half NIM improved to 1.68% for the quarter, with an exit margin of 1.8%.

However, while management believes the current environment is “favorable to margins in the first half” of fiscal 2023, it believes that any “changes from the exit margin will likely be more modest.”

This strong end to the year enabled the ANZ Board to declare a final fully franked dividend of 74 cents per share, bringing its dividend for the full year to 146 cents per share. That’s up from 142 cents per share in fiscal 2021.

How does this compare to expectations?

The good news for ANZ’s share price today is that the company’s earnings and dividends appear to have been a bit ahead of expectations.

For example, Goldman Sachs forecast second-half cash earnings of $3,309 million and a full-year dividend of 143.4 cents per share.

How have ANZ businesses fared?

During the second half, the Australia Retail business recorded a 6% increase in profit compared to the first half. Management notes that the company closed the year with positive home loan momentum and approval times in line with its major peers. There has also been strong customer adoption of ANZ Plus, with deposits reaching $1.2 billion, growing at a faster rate than any new digital bank in Australia.

The Australian retail business recorded a 10% increase in revenue for the year and an 11% increase in profit thanks to good volume growth and disciplined margin management. The business recorded net loans and advances growth of 6% for the year, with solid loan growth in specialty segments, including agribusiness and healthcare.

Elsewhere, the institutional business ended the year strong with revenue up 10% per halve on strong demand and the New Zealand business recorded a profit of 5% per halve. The latter reflects its continued market share in key products including retail and fund management.

Management commentary

ANZ CEO Shayne Elliott said he was pleased with the bank’s performance. He said:

This is a strong financial result, with all divisions making significant contributions and demonstrating the benefits of a diversified portfolio.

We have reinvigorated Australian home lending with application approval times in line with our industry peers. We continued to redesign Australia Retail’s platform on ANZ Plus, which is our new digital bank, with deposits already exceeding $1.2 billion and growing at a faster rate than any new digital bank in Australia .

We continued to systematically de-risk the bank, evidenced by the sale of our margin lending business to Bendigo & Adelaide Bank and only last month we completed the formal separation of our Wealth business from Insignia and Zürich. Combined with the release of Financial Planning & Advice, as well as the associated remediation being at the very latest stage, we are the only major bank in Australia to have removed the risks associated with wealth management for shareholders.

Outlook

No real guidance has been given for fiscal 2023, but Elliott seems cautiously optimistic for the next 12 months.

He commented:

There is uncertainty ahead, but we have the business in good shape to weather the volatility. We also have a highly engaged workforce with a high performance culture and I am confident in our ability to continue to deliver for customers and shareholders.

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