The Australia and New Zealand Banking Group (ASX: ANZ) share price has come under pressure today following the release of the bank's full-year results.
At the time of writing its shares are down almost 2% to $29.98.
Here are key highlights from the release:
- Statutory profit of $6,406 million, up 12% year-on-year.
- Cash Profit increased 18% to $6,938 million.
- Return on Equity increased 159 basis points to 11.9%.
- Net Interest Margin slid 8 basis points to 1.99%.
- Earnings per share up 17% to 237.1 cents.
- Final full franked dividend of 80 cents per share, bringing its full-year dividend to $1.60.
- Common Equity Tier 1 Ratio increased to 10.6%.
- Potential share buyback on the horizon.
Overall I felt this was a solid result from ANZ and I'm reasonably surprised to see its shares drift lower today. Especially given that its cash profit was in line with the market's expectations.
The improved financial performance was largely the result of a reduction in costs by the bank.
FY 2017 was the first time in 18 years that its cost base has fallen in absolute terms and is all part of its strategy of becoming a simpler, better capitalised, better balanced, and more agile bank.
The healthy capital position that this strategy has created has allowed ANZ to pay a $1.60 per share dividend this year. Which equates to a fully franked 5.3% dividend yield at the current share price.
Furthermore, it has put the bank in a position to consider a share buyback.
CEO Shayne Elliott revealed that as the bank sells off its non-core assets, it doesn't plan to "sit on lazy capital" and would "consider returning that to shareholders" instead.
This could be through the form of a share buyback or potentially even a special dividend.
Should you invest?
While a share buyback or special dividend does make ANZ that little bit more attractive, like rivals Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA), I consider ANZ to be about fair value at the current share price.
In light of this, I would class its shares as a hold.
