The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is dropping on Thursday.
At the time of writing, the banking giant's shares are down 4.5% to $24.67.
This follows the release of ANZ's full year results this morning.
How did ANZ perform?
For the 12 months ended 30 September, ANZ reported a 5% lift in cash profit from continuing operations to $6,515 million. This was driven by solid performances across all its operations and the benefits of rising interest rates.
In respect to the latter, ANZ's second half NIM improved to 1.68%, with an exit margin of 1.8%.
Though, don't expect the bank's NIM to keep improving wildly from its exit level. Management warned that the current environment is "supportive for margins in the first half" but any "change from the exit margin is likely to be more modest."
This ultimately 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 2.8% from 142 cents per share in FY 2021.
Why is the ANZ share price falling?
The reaction to this result has been relatively lukewarm, which may explain the ANZ share price performance today.
Commenting on the result, Goldman Sachs said:
ANZ reported FY22 cash earnings (company basis) from continued operations were up 5% on pcp to A$6,515 mn, 1.4% ahead of GSe, with the beat driven by primarily by outperformance on the BDD charge and supported by slightly better expenses.
FY22 PPOP came in 1% lower than GSe, as an in-line NIM performance was more than offset by slightly weaker volumes and weaker than expected performance in Markets income. The proposed final DPS of A74¢ was higher than GSe (A72¢) and implies a payout ratio of 65% and will come with a non discounted DRP.
Net interest margin could drive estimate upgrades
One thing Goldman Sachs was particularly pleased with was ANZ's exit margin. It notes that if the bank can improve or maintain this margin for the whole of FY 2023, it would likely result in higher than forecast earnings. It said:
if we assume i) the 1H23 NIM is c. 3 bp ahead of the 2H22 exit NIM of 1.80%, and then this holds through 2H23, and ii) 5% expense growth, then this would represent 8%/9% upside to FY23 GSe/Visible Alpha Consensus PPOP, all else being equal. If the FY23E NIM only holds the 2H22 exit of 1.80%, then the FY23E PPOP upside would still be 6%/7% respectively.
Goldman currently has a neutral rating and $26.09 price target on the ANZ share price.
