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ANZ (ASX:ANZ) share price on watch after revealing $528 million earnings hit

ANZ share price

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will be one to watch on Wednesday.

This afternoon it became the latest big four bank to announce notable items that will impact its upcoming results.

What did ANZ announce?

ANZ has announced that its second half 2020 cash profit will be impacted by an after tax charge of $528 million as a result of large notable items. This is expected to impact its common equity tier one capital by approximately 5 basis points.

According to the release, the notable items include remediation costs and accelerated software amortisation.

Remediation charges recognised in the second half of 2020 will be $188 million after tax. These are largely related to an acceleration of remediation programs and product reviews across the bank.

Whereas changes to the application of ANZ’s software amortisation policy have resulted in a $138 million after tax charge being recognised in the second half.

The company revealed that these changes were made to reflect the increasingly shorter useful life of various types of software assets. This has been caused by rapidly changing technology and business requirements.

What about the rest?

The remaining charges of $202 million after tax include the write-down of goodwill in ANZ’s Pacific business, the impact of AASB 9 accounting changes on its investment in PT Panin, and restructuring charges.

ANZ’s Pacific business has had its goodwill written down by $77 million, restructuring charges total $41 million, and accounting changes make up the balance.

FY 2020 totals.

These latest notable items bring ANZ’s total for FY 2020 to $1,539 million, up materially from $231 million in FY 2019.

The biggest contributor has been the impairment of its Asian businesses, which totalled $815 million for the year. After which, customer remediation is once again a thorn in the bank’s side.

This year a total of $279 million is going towards customer remediation, following $475 million a year earlier.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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