Why are ANZ shares falling 4% on Monday?

This banking giant is being sold off on Monday. But why?

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ANZ Group Holdings Ltd (ASX: ANZ) shares have opened the week deep in the red.

In morning trade, the banking giant's shares are down 4% to $24.50.

Why are ANZ shares sinking?

Investors have been selling down ANZ's shares today after the company released its FY 2023 results and revealed earnings that were short of expectations.

As we covered here, the bank reported a 5% increase in operating income to $20,459 million and a 14% lift in cash earnings to a record of $7,405 million.

The latter was driven almost entirely by its Institutional business, which reported a 53% jump in cash earnings to $2,963 million for the year.

However, as strong as this may look on paper, it was below consensus estimates due to softer-than-expected second-half margins.

And while ANZ's dividend for FY 2023 was ahead of expectations, this was a bit of a technicality due to its franking.

Broker response

Goldman Sachs was disappointed with the result. It commented:

ANZ reported FY23 cash earnings (company basis) from continued operations were up 14% on pcp to A$7,405 mn, 4% below GSe, with the miss driven by lower than expected interest income partially offset by a lower BDD charge. This translated to an FY23 PPOP which came in 4% lower than GSe. ANZ's 2H23 CET1 ratio was 13.34% (12.09% on a pro-forma basis, adjusted for the proposed Suncorp Bank acquisition and NOHC surplus capital; 19.2% globally-harmonised), broadly consistent with our expectations.

The proposed final DPS of A94¢ was well ahead of GSe (A81¢), but consists of an A81¢ dividend partially franked at 65%, and an additional one-off unfranked dividend of A13¢. The level of franking reflects the geographically diverse nature of ANZ's earnings, as well as the timing of the proposed Suncorp Bank transaction. The DRP operating in conjunction with the proposed final 2023 dividend, will be done with no discount, and the shares will be purchased on-market.

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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