Next Thursday the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will be on watch when the banking giant releases its full year results.
Ahead of the release, I thought I would take a look to see what the market is expecting from the bank following a turbulent year.
What is expected from ANZ?
According to a note out of Goldman Sachs, its analysts expect ANZ to report second half cash earnings (before one-offs) of $2,667 million. This will be an 8% decline on the prior corresponding period.
For the full year, this will mean cash earnings (before one-offs) of $4,080 million, down 37% on FY 2019’s result.
The broker is also expecting the bank to declare a final 40 cents per share partially franked dividend, bringing its full year dividend to 65 cents per share.
What else should you look out for?
Goldman has suggested that investors keep an eye on the bank’s asset quality.
It commented: “We forecast a moderation of 2H20E BDDs/TL to 40bp from 55bp in the previous half and will be keeping a close eye on asset quality commentary.”
“Whilst ANZ’s overall loan deferrals as a % of total loans (<10% as of Aug-20) sit at the lower end vs peers, unlike peers, ANZ’s cumulative net new mortgage deferrals in Jun/Jul/Aug-20 as a % of the May-20 balance has actually deteriorated,” the broker added.
Another metric to watch will be its loan growth, which has been improving in recent months.
Its analysts explained: “We currently forecast FY20E loan grown of 4% and particularly note the recent improvement in ANZ’s domestic housing momentum. Post the onset of “responsible lending” regulations, ANZ’s conservative response led to a notable drop in their lending growth and by extension market share.”
“However, in the three months to Aug-20, they achieved the highest total lending growth vs the peer group driven by outperformance in housing lending (ANZ’s average growth in the 3-month period came in at 10.5% vs peers CBA at 4.3%, NAB at -2.2%, WBC at -0.2%),” it added.
Finally, the broker will be looking for commentary on the bank’s costs.
Goldman expects its second half expenses to rise 1.9% on the prior corresponding period to bring its full year total to $9,187 million or $8,800 million excluding one-offs.
However, it believes the bank is well-placed to cut its costs materially in the future and offset the deteriorating revenue environment.
The broker notes: “ANZ’s performance on costs in recent years has been superior to peers and while management remains committed to its A$8 bn expense ambition, timing around when such a target can be reached will continue to evolve subject to how the current crisis plays out. We expect to receive more detail on this issue at the result.”
Goldman Sachs has a neutral rating and $20.99 price target on ANZ’s shares.