The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price will be on watch this morning.
This follows the release of the banking giant's eagerly anticipated full year results.
ANZ share price on watch amid strong earnings
- Statutory profit after tax up 16% to $7,119 million
- Cash earnings from continuing operations up 5% to $6,515 million
- Dividends per share up 3% to $1.46
- CET1 ratio 12.3%
- Second half net interest margin (NIM) of 1.68%
- Exit NIM of 1.8%
What happened during FY 2022?
For the 12 months ended 30 September, ANZ reported a 16% increase in statutory profit after tax to $7,119 million and a 5% lift in cash profit from continuing operations to $6,515 million.
The latter follows a strong second half which saw ANZ's cash profit rise 9% to $3,402 million thanks to improvements in its NIM. ANZ's second half NIM improved to 1.68%, with an exit margin of 1.8%.
However, while management believes that the current environment is "supportive for margins in the first half" of FY 2023, it believes any "change from the exit margin is likely to be more modest."
This strong finish to the year allowed the ANZ board to declare a fully franked final dividend of 74 cents per share, bringing its full year dividend to 146 cents per share. This is up from 142 cents per share in FY 2021.
How does this compare to expectations?
The good news for the ANZ share price today is that the company's profits and dividend appear to have been a touch ahead of expectations.
For example, Goldman Sachs was forecasting a second half cash profit of $3,309 million and a full year dividend of 143.4 cents per share.
How did ANZ's businesses perform?
During the second half, the Australia Retail business reported a 6% increase in profit over the first half. Management notes that the company closed the year with positive home loan momentum and approval times back in line with major peers. There was also strong customer up-take of ANZ Plus, with deposits reaching $1.2 billion, growing at a faster pace than any new digital bank in Australia.
The Australia Commercial business reported a 10% increase in revenue for the year and an 11% increase in profit thanks to good volume growth and disciplined margin management. The business grew net loans and advances by 6% over the year with solid lending growth in specialist segments including agribusiness and health.
Elsewhere, the Institutional business ended the year strongly with a 10% half on half increase in revenue thanks to strong demand and the New Zealand business reported a 5% half on half profit. The latter reflects its continued market share lead in key products including retail and funds management.
Management commentary
ANZ's CEO, Shayne Elliott, was pleased with the bank's performance. He said:
This was a strong financial result with all divisions making a material contribution and demonstrating the benefits of a diversified portfolio.
We restored momentum in Australian home loans with application approval times back in line with industry peers. We continued the re-platforming of Australia Retail onto ANZ Plus, which is our new digital bank, with deposits already exceeding $1.2 billion and growing at a rate faster than any new digital bank in Australia.
We continued the systematic de-risking of the bank, highlighted by the sale of our margin lending business to Bendigo & Adelaide bank and just last month we completed the formal separation of our Wealth business to Insignia and Zurich. Combined with the exit of Financial Planning & Advice, as well as the associated remediation being at the very final stage, we are the only major bank in Australia to have removed the risks associated with wealth management for shareholders.
Outlook
No real guidance was given for FY 2023, but Elliott appears cautiously optimistic on the next 12 months.
He commented:
There is uncertainty ahead, however we have the business in good shape to withstand volatility. We also have a highly engaged workforce with a high-performance culture and I'm confident in our ability to continue to deliver for customers and shareholders.
