ANZ share price on watch amid record $7.4b cash profit and special dividend

ANZ has delivered a record result but is it still short of expectations?

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The ANZ Group Holdings Ltd (ASX: ANZ) share price will be one to watch today.

That's because the banking giant has just released its full-year results for FY 2023.

ANZ share price on watch following results

Here's a summary of how the bank performed during the 12 months ended 30 September:

  • Operating income up 5% to $20,459 million
  • Statutory profit after tax flat at $7,098 million
  • Cash earnings up 14% to a record $7,405 million
  • Dividends per share up 20% to 175 cents per share
  • Net interest margin up 7 basis points to 1.7%
  • CET1 ratio up 105 basis points to 13.3%

ANZ's earnings growth was driven largely by its Institutional business, which reported a 53% jump in cash profit to $2,963 million. This was supported by a modest increase in New Zealand earnings to $1,552 million, which helped offset softer earnings from the Australia Retail and Australia Commercial divisions.

However, disappointingly, the Australia Retail, Australia Commercial, and Institutional businesses all reported half on half earnings declines during the second half.

Nevertheless, this couldn't stop the ANZ board from increasing its final dividend and declaring a special dividend.

ANZ declared a 94 cents per share final dividend, comprising an 81 cents per share dividend partially franked at 65% and an additional one-off unfranked dividend of 13 cents per share. This brought its full-year dividend to 175 cents per share, which represents a 20% increase over the prior corresponding period.

Management notes that the level of franking reflects the geographically diverse nature of its business, as well as the timing of the proposed Suncorp Bank transaction.

It also acknowledges that lower franking may not have been anticipated by some shareholders. In recognition of this, and given its strong performance, the board agreed that the one-off unfranked dividend was appropriate.

How does this compare to expectations?

While the one-off dividend will be a positive surprise, the bad news for the ANZ share price is that the result appears to have fallen short of expectations.

For example, Goldman Sachs was expecting cash earnings of $7,711 million for FY 2023, and the consensus estimate was for cash earnings of $7,537 million.

Management commentary

ANZ's CEO, Shayne Elliott, was pleased with the record result, noting that the bank's transformation program played a key role in it. He said:

This is a strong annual result, with record revenue and cash profit following several years of transformation, enabling us to continue to support our customers and improve their banking experience. We continued to strengthen our balance sheet and closed the year with provisions for potential credit losses higher than prior to the pandemic, and with more capital than ever before. This is critical as we enter a period of continued high interest rates, rising costs and geopolitical tensions.

While our first half was stronger, the second half delivered an outstanding revenue and profit result, demonstrating the benefits of our diversified franchise.

Commenting on the bank's outlook, Elliott adds:

Looking ahead, we will continue to manage costs to create capacity for further investment in ANZ Plus, growing our Commercial business and enhancing our sustainability, currency and payments platforms.

The external environment is likely to remain challenging. The full impact of higher interest rates is expected to continue to impact economic activity as well as household and business budgets. Despite these challenges, we expect the economy will be supported by strong household savings, resilient housing markets, low unemployment, solid business investment intentions and strong migration in Australia and New Zealand.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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 Scott Phillips.

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