The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will be one to watch closely on Tuesday.
This follows the release of an announcement after the market close on Monday.
Why is the ANZ share price on watch?
After the market close on Monday, ANZ released an update on its capital management plans.
According to the release, ANZ intends to buy-back up to $1.5 billion of shares on-market as part of its capital management plan.
This news could give the ANZ share price a boost, especially given how many analysts felt the recent COVID-19 outbreak could mean the banks postpone capital management plans.
ANZ’s Chair, Paul O’Sullivan, commented: “Despite the very real challenges being experienced by many of our customers, we have the financial strength to continue to support our customers, while also returning surplus capital to shareholders. After reviewing options, we consider an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment.”
Positively, the capital returns may not stop there. Mr O’Sullivan commented: “Our capital position may allow future capital returns to be considered, however we will continue to focus on balanced and prudent outcomes for all stakeholders.”
ANZ’s Chief Executive Officer, Shayne Elliott, advised that the bank took into account the current lockdowns when making the decision to undertake an on-market buy-back.
He said: “After taking into consideration the ongoing pressures in some parts of the economy due to COVID, including the current lockdowns in parts of the country, the strength of our balance sheet and ongoing financial performance means we are in a position to return a modest amount of surplus capital to shareholders through a buy-back of shares on-market.”
“Just as we supported our customers through previous lockdowns we stand ready and able to provide assistance to those that need it. The strength of our business means we are well placed to fulfil needs of our customers and the broader community while still actively managing our capital,” Mr Elliott added.
The bank expects to begin purchasing shares on-market in August 2021.
The good news for shareholders and the ANZ share price is that ANZ’s balance sheet will remain strong even after this capital return.
The release explains that ANZ’s reported Level 2 and Level 1 Common Equity Tier 1 capital (CET1) ratios were 12.4% and 12.2% respectively, at the end of March. This was well in excess of APRA’s stated unquestionably strong capital requirement of 10.5%.
Following this on-market buy-back, ANZ’s March 2021 CET1 ratio would reduce by approximately 35 basis points. This would mean ratios of 12.05% and 11.85%, respectively.
The ANZ share price is up 18% since the start of the year.