The Australia and New Zealand Banking Group (ASX: ANZ) share price rose by almost 3% today.
It's quite rare for one of the major ASX banks to go up (or down) by that much in one day.
The reason for the rise was the release of its half-year report for the six months to 31 March 2019.
ANZ revealed that its continuing basis cash profit increased by 2% to $3.564 billion and earnings per share (EPS) rising by 5% to just under $1.25 per share. Thankfully for ANZ shareholders the fully franked dividend per share was kept at 80 cents, as it has been for several results.
ANZ Chief Executive Officer Shayne Elliott said "The work started in 2016 to simplify our business and strengthen our balance sheet has helped us weather the strong headwinds in Australian retail banking, while still producing a balanced financial outcome for shareholders.
"Other parts of the business performed solidly. Institutional has been transformed into a well-managed business delivering consistent and diversified results for shareholders as well as customers. New Zealand also put in another good performance."
Indeed, New Zealand cash profit was up 18% to NZ$1.11 billion including the impact of one-off items. Customer deposits were up 7% and gross lending was up 4%. However, Mr Elliot warned that New Zealand is starting to share similar characteristics with the Australian market due to strong competition and a slowing Auckland housing market.
Furthermore, Mr Elliott said that the tough Australian retail banking environment will be a reality for the foreseeable future.
Foolish takeaway
Under the circumstances, this was a solid report from ANZ but all of the signs are there for a tough upcoming few years, particularly with the rise of Australian mortgage delinquencies. Although the grossed-up dividend yield of 8.2% looks attractive there is a chance it could be a yield trap if bad debts rise significantly over the next year or two.
