ANZ Bank Profit Rises as Australia’s Economic Rebound Builds

(Bloomberg) -- Australia & New Zealand Banking Group Ltd.’s first-half profit climbed as the lender wound back bad debt provisions made during the pandemic and the country’s economic recovery builds.

Cash earnings from continuous operations rose to A$3 billion ($2.3 billion) in the six months through March 31, compared with A$1.4 billion in the same period a year earlier, according to a statement Wednesday. That narrowly missed the A$3.1 billion estimate of four analysts surveyed by Bloomberg. The Melbourne-based firm lifted its interim dividend to 70 Australian cents per share.

ANZ is the second of the nation’s four biggest banks to give an investor update this results season after Westpac Banking Corp. on Monday said profit surged and reinstated an interim dividend that it was forced to cancel last year due to the pandemic. The country’s central bank on Tuesday upgraded its economic outlook for a recovery that’s helping to offset pressure on banks from the low interest rate environment.

“We are going to see an increase in strength in the economy here in Australia and in New Zealand,” Chief Executive Officer Shayne Elliott said in a Bloomberg TV interview from Melbourne. “The economy is firing well on so many cylinders.”

The booming housing market helped ANZ secure its spot as the country’s third biggest lender for home lending, behind Commonwealth Bank of Australia and National Australia Bank Ltd., as the firm’s provided about 92,000 new home loan accounts in Australia. CEO Elliott is now five years into a strategy that’s focused on simplifying the bank’s structure.

Seperately, Elliott said the bank is in a strong position to make acquisitions and didn’t rule out the firm’s interest in Citigroup Inc.’s retail operations in Australia.

Key Insights

• Total release of provisions A$491 million
• Common equity Tier 1 ratio 12.4%
• Net interest margin on cash basis slipped to 1.63% from 1.69% a year earlier
• Return on equity on cash basis climbed to 9.7% from 4.4%

What Bloomberg Intelligence Says

““In terms of home loans, ANZ has lost share since September in a booming housing market and their margin outlook isn’t great,” said Bloomberg Intelligence analyst Matt Ingram. “The other thing investors are going to be concerned about is the dividend -- the payout ratio is still much lower than their pre-covid average.”

Market Reaction

• ANZ shares slipped 0.5% as of 10:11 a.m. in Sydney. They remain 26% higher this year.

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