Following earnings from WBC and NAB last week, this morning ANZ has reported full year 2023 results.
Shares are down -2.7% this morning despite a record cash profit with investors focusing on net interest margins, which improved less than expected amid competition for home loans.
Despite a notable 14% increase in cash profit, reaching A$7.41 billion, the results fell short of the anticipated A$7.51 billion. The results reveal a mixed bag across different segments of ANZ’s operations. While the institutional cash profit surged by 53% to A$2.96 billion, the Australian retail and commercial sectors witnessed downturns of 6.7% and 7.2%, respectively. This disparity underscores the varying impact of economic forces on different banking divisions.
A significant concern is net interest margins (NIM), which, at 1.7%, failed to meet the expected 1.73%. This shortfall is particularly glaring in the context of the Australian retail margins, which saw a decrease of 33 basis points, reflecting increased competition for home loans. A final dividend of $0.94 was announced, up from $0.74 a year earlier, bringing the total for 2023 financial year to $1.75.
Looking ahead, Chief Executive Officer Shayne Elliott emphasised the resilience of ANZ’s customer base amid economic uncertainties, highlighted by low delinquency rates. However, he cautioned about the ongoing impact of rising interest rates on economic activities and household budgets. This realism is mirrored in the bank’s cautious stance, marked by strengthening its balance sheet and preparing for potential credit losses, more substantial than pre-pandemic levels.
The bank is also eyeing the acquisition of Suncorp Bank, with a decision by the Australian Competition Tribunal expected in February 2024 after the ACCC earlier knocked back the deal. According to estimates from Bloomberg Intelligence, a failed acquisition of Suncorp could lead to a $4 billion share buyback program.
ANZ’s financial results for 2023 highlight a mixed picture, in line with what we have already seen from other major banks. The bank has navigated a tough economic environment relatively successfully, while challenges like margin pressures and an uncertain economic outlook remain critical for the future. However, there are also positive signs, including a more resilient housing market than previously anticipated, supported by limited supply and higher immigration, with only 2,000 of ANZ’s one million mortgage customers in hardship.
As a reminder, ANZ’s inclusion in the ASX Blue Chip portfolio is based on dividend yield, which at 8.95% on a gross basis is one of the higher among large-cap stocks. ANZ remains an active buy/hold recommendation in this portfolio.