ANZ Bank (ASX:ANZ) reports $6,487 million cash profit: Should you invest?

The Australia and New Zealand Banking Group (ASX: ANZ) share price will be on watch on Wednesday after the banking giant released its full year results this morning.

Here is a summary of how ANZ Bank performed in FY 2018 compared to a year earlier:

  • Statutory profit after tax was flat at $6,400 million.
  • Cash profit (including discontinued operations) fell 16% to $5,805 million.
  • Cash profit from continuing operations down 5% to $6,487 million.
  • Gross Loans and Advances (GLAs) up 4% to $608.4 billion.
  • Total credit impairment charge as a % of average GLAs down 9 basis points to 0.12%.
  • Customer deposits up 4% to $487.3 billion.
  • CET1 ratio up 87 basis points to 11.4%.
  • Earnings per share down 4% to 223.4 cents.
  • Final dividend flat at 80 cents per share, bringing total dividend to $1.60 per share.

Overall, I thought this was a solid result from the banking giant with positives being seen across the business. Especially in relation to its cash profit from continuing operations of $6,487 million, which was well ahead of expectations.

A recent note out of Goldman Sachs revealed that its analysts were expecting the bank to post a full year cash profit from continuing operations of $6,341 million. This compared to the Bloomberg consensus estimate of $6,374 million.

Which means ANZ Bank’s result is 2.3% higher than Goldman’s estimate and 1.8% higher than the Bloomberg consensus estimate.

In addition to this, I was pleased to see that its GLAs and customer deposits rose strongly despite the negative media coverage surrounding the bank and its peers during the Royal Commission. This could be a sign that most consumers haven’t been influenced by the Commission.

Another big positive in my eyes was that the total credit impairment charge as a percentage of average GLAs fell 9 basis points to 0.12% and new impaired assets fell a sizeable 34% to $2,108 million.

This was driven by the bank’s decision to change the composition of its loan book, the sale of its retail business in Asia, and a relatively benign credit environment.

The bank also reported an 11% decrease in its full-time equivalent staff to 39,924. This helped reduce total expenses (excluding large notable items) by 1.5% for the year.

ANZ chief executive officer Shayne Elliott was pleased with the result. He said: “The actions taken in recent years to simplify our business have allowed us to reduce cost, rebalance capital and better remediate issues. This places ANZ in a stronger position to meet the challenges facing the industry.”

Looking ahead, Mr Elliott is cautiously optimistic. He said: “We expect the tough revenue growth environment in retail banking in Australia to continue for the foreseeable future, however we are well positioned to take advantage of growth opportunities in Institutional, Asia and New Zealand.”

Before adding that: “The work we began in 2016 to simplify our business, better focus on customers, improve our cost base and significantly improve our capital position, along with our exposure to international trade, puts us in a good position to manage any challenges ahead”

Should you invest?

I think that it is well worth considering ANZ Bank after this result, especially given the low multiples its shares trade on and the generous dividend they offer.

All in all, I would put it up there alongside rival Westpac Banking Corp (ASX: WBC) and ahead of Commonwealth Bank of Australia (ASX: CBA) right now.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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