ANZ (ASX: ANZ) bank released its FY13 results this morning and has beaten the market's expectations by recording 11% cash profit growth to $6.5 billion.
In the year to September the bank notched up an impressive statutory net profit of $6.27 billion, up from $5.66 billion a year earlier. The company's aggressive push into Asia and the Australian mortgage market helped it grow revenues substantially.
ANZ CEO Mike Smith said, "This is a strong performance, the result of a distinctive long-term strategy focused on growth in our domestic franchises and targeted expansion in Asia." Highlights from the year are as follows:
- Statutory net profit after tax of $6.3 billion, up 11%
- Cash profit (the preferred measure) after tax of $6.5 billion, up 11%
- Return on equity up 20 basis points to 15.3%
- Earnings per share up 9% to 238.5 cents
- Fully franked final dividend of 91 cents per share taking the total dividend 13% higher to 164 cents per share
- Customer deposits grew 12%
- Loans and advances up 10%
- Credit quality improved further with gross impaired assets down 18% and the provision charge down 5%
ANZ experienced the strongest overall growth of any of the big four banks, including the Commonwealth Bank (ASX: CBA) and Westpac (ASX: WBC), across home loans, deposits and credit cards, growing profits by 11%.
The company's International and Institutional Banking arm grew profit 15%, while expenses dropped 3%. ANZ's ability to leverage growth in Asia from its market leading positions in Australia and New Zealand helped its result. Of IIB's revenue, 48% came from the Asia Pacific Europe and Americas division in 2013. In addition Asian commercial businesses continue to grow quickly, with compound annual growth of 29% over the past three years, providing "a valuable source of markets and trade finance revenue". Asia pacific revenue grew 24% to $12.9 billion.
In New Zealand, profit grew by 29%, expenses decreased by 15% and the provision charge reduced 76%. Improved brand coverage was a focus in New Zealand and has increased 7% since 2010. Small business banking volumes grew strongly and the bank recognised a 13% increase in new to bank customers.
The banks' Global Wealth Division grew profit 36%. A simplification of the business and leveraging regional capabilities resulted in improved returns — the cost to income ratio declined 470 basis points. Retail life insurance in-force premiums grew 10% and FUM increased 13%.
The company's FY14 outlook remains positive and includes 4% to 5% revenue growth, expense growth of 2% whilst priorities include above peer EPS and improved ROE (pushing towards 16% by 2016). The company will be hoping to improve revenue growth from APEA as it seeks to generate 25%-30% of earnings from the region by 2017. Group operating income from Asia represents only 17%, which shows the bank still has a long way to go before its meets its target.
The board is expecting to pay out between 65% and 70% of cash profit in the medium term with a bias towards the upper end of the range in the near term. The increased dividend reflects strong earnings with a desire to improve shareholder returns.
ANZ remains the bank most leveraged to growth out of the big four yet trades on the lowest earnings multiples, after the National Australia Bank (ASX: NAB). Although none the banks are 'buys' at current prices, ANZ is one stock that has good management, pays a strong dividend and an exciting future ahead of it. If this Fool had to choose between banks, ANZ is where I'd put my money.