ANZ (ASX:ANZ) share price on watch after reporting $2.9bn half year profit

The Australia and New Zealand Banking GrpLtd (ASX:ANZ) share price will be on watch today after reporting a $2.9 billion half year profit…

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

This follows the release of the banking giant’s highly anticipated half year results.

How did ANZ perform in the first half?

For the six months ended 31 March, ANZ reported a statutory profit after tax of $2,943 million and cash earnings from continuing operations of $2,990 million. This was up 45% and 28%, respectively, on the second half of FY 2020.

Boosting ANZ’s result was a net credit provision release of $491 million for the half. This is up from a net release of $150 million during the first quarter.

The bank advised that despite ongoing uncertainty, the credit provision release is a result of the improving economic outlook over the course of the half, as well as some loan volume reductions. It notes that home loan and small business customers have also behaved prudently by building savings buffers through the half.

This ultimately led to ANZ reporting earnings per share of 105.3 cents, return on equity of 9.7%, and a CET1 ratio of 12.4%.

Positively for shareholders and the ANZ share price today, this allowed the ANZ board to declare a fully franked interim dividend of 70 cents per share.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting cash earnings (company basis) of $2,579 million and a fully franked interim dividend of 60 cents per share.

This means that ANZ has smashed both estimates, which could bode well for the ANZ share price on Wednesday.

What were the drivers of its result?

ANZ’s Chief Executive Officer, Shayne Elliott, advised that all sides of the business performed well, which was complemented by cost reductions.

He said: “Following the trends of the first quarter, all parts of our business performed well. Costs were down 2% and we also increased investment in new digital capability that will provide ongoing productivity improvements and better customer outcomes.”

“Australia Retail & Commercial had another good half, becoming the third largest home lender in the market. Deposits performed well, with retail and small business customers behaving prudently by building solid savings and offset balances through the half,” he added.

And while its Institutional business reported lower revenues, this was in line with expectations.

Mr Elliott explained: “Lower revenues in our Institutional business were largely expected due to the impact of falling interest rates as well as a normalisation of Markets revenue after an exceptionally strong 2020. Our disciplined focus on credit management has been a positive with our largest customers going into the pandemic from a position of strength and adapting fast to the rapidly changing environment.”

Positively, its New Zealand business performed strongly.

“New Zealand continued its recent strong performance with record lending growth combined with disciplined cost management. This is a well-run business that is an important part of our overall portfolio and is well-placed to manage increased regulatory capital demands,” the Chief Executive advised.

Outlook

Mr Elliott appears cautiously optimistic on the future.

He said: “There is still significant uncertainty. You only need to look at how the pandemic is playing out overseas, as well as recent lock-downs, to realise how quickly the situation can escalate.”

Before adding: “ANZ is in a strong position both financially and operationally. We are well capitalised and our disciplined approach to costs over many years has us well placed to invest in opportunities to grow our business in targeted segments. The work to digitise core processes and platforms continues at pace and this will be more visible to customers towards the end of the year.”

The ANZ share price is up 25% since the start of the year.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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