ANZ share price on watch amid first-half earnings beat and $2b buyback

The banking giant appears to have outperformed expectations during the half.

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

That's because the banking giant has become the latest big four member to release its half-year results this morning.

Let's now take a look at what the bank reported.

ANZ share price on watch following results release

  • Statutory profit after tax down 4% half on half to $3,407 million
  • Cash profit down 1% to $3,552 million
  • Net interest margin down 2 basis points to 1.63%
  • Partially franked interim dividend up 2.5% to 83 cents per share
  • $2 billion on-market share buyback

What happened during the half?

For the six months ended 31 March, ANZ posted a cash profit of $3,552 million. This represents a 1% decline compared to the second half of FY 2023.

The good news for shareholders is that this result is a touch ahead of the consensus estimate of $3,531 million.

The key driver of its result was the Institutional business, which reported a 12% lift in cash profit to $1,522 million. This reflects a 27% increase in Markets income driven by higher customer activity and favourable trading conditions. Management notes that it was the business' strongest first-half performance since FY 2017. It also highlights that international profit was up 19%, which it believes demonstrates the benefit of its globally diversified business.

Also delivering growth was the New Zealand business, which saw its cash profit increase 2% to NZ$852 million. This reflects moderate balance sheet growth with lending up 1% and deposits up 2%, despite challenging economic conditions.

The Australia Commercial business had a soft half, reporting a 5% decline in cash profit to $665 million. This was despite strong balance sheet growth with lending up 4% and deposits up 3%.

But the main drag on its profits was the Australia Retail business. It posted a 9% decline in cash profit to $794 million for the half. Management advised that this was despite delivering above-system home loan growth with pricing above cost of capital.

Dividend increase and share buyback

ANZ's softer earnings didn't stop its board from increasing its dividend by 2 cents or 2.5% to 83 cents per share. As with its final dividend, this interim dividend will be partially franked (65%).

This dividend was also ahead of the consensus estimate of 81 cents per share.

But the returns don't stop there. Following in the footsteps of Westpac Banking Corp (ASX: WBC), ANZ has declared a $2 billion on-market share buyback this morning. This is part of its capital management plan. The bank advised that it reflects its strong capital position and the benefits of the partial sale of its share in AmBank.

This means it was three for three for ANZ, with analysts at Goldman Sachs only forecasting a $1.5 billion share buyback. This could bode well for the ANZ share price on Tuesday.

Management commentary

ANZ CEO, Shayne Elliott, was pleased with the half. He said:

This half's strong performance is a direct consequence of peer-leading diversification as well as our disciplined focus on productivity and delivery. Coming off a record 2023, each division delivered for the Group and we've made good progress on the things we said we would: preparing for the integration of Suncorp Bank, growing ANZ Plus, leveraging our Institutional processing platforms, and further driving productivity.

Commenting on the bank's outlook, Elliott appears cautiously optimistic. He adds:

Both the domestic and international environments are expected to remain challenging across the remainder of the year. The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally.

Despite these conditions, we are well positioned with the diversity of our businesses, prudent management, and the strength of our customers holding us in good stead. In fact, our work to build a well-managed, de-risked and diversified bank, coupled with our unique international presence, means we are well placed to succeed in this environment.

The ANZ share price is up 21% over the last 12 months.

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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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