ANZ shares hit 52-week high despite alleged $54 billion problem

There's both good news and bad news for ANZ shareholders today.

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The ANZ Group Holdings Ltd (ASX: ANZ) share price jumped to $29.89 in early trade today, reaching a new 52-week high, surpassing previous levels reached in March 2024, as we can see on the chart below. But, this comes as ANZ faces a potential issue related to bond trading.

ANZ's main earnings generator may be loans, but the business is also one of the large traders of Australian government bonds.  

According to reporting by the Australian Financial Review, ANZ supplied incorrect figures to the Australian Office of Financial Management (AOFM).

Alleged inflated bond trading figures

The AFR reported that ANZ overstated the value of government bonds it traded by over $50 billion in the last 12 months, which then allegedly boosted its prospects by winning mandates from the government to issue Commonwealth debt.

ANZ is meant to submit quarterly figures to the agency, and then AOFM selects the largest traders for issuances.

The bank reported to the AOFM that it had traded $137.6 billion in government bonds for clients in FY23. It then later disclosed that the correct figure was $83.2 billion.

This comes after the AFR reported earlier this year that the regulator was investigating ANZ's trading for "allegedly manipulating the benchmark 10-year futures rate" when it was appointed as a manager for a $14 billion government bond sale last year. The AFR said this could have made ANZ a sizeable profit, paid multi-million bonuses to the traders, and cost taxpayers $80 million in extra borrowing costs.

Since then, ANZ has been excluded from some major government transactions. The ASX bank share normally makes between $5 million to $10 million a year by being the manager of large syndicated Australian government bond sales every year, and it makes much more for facilitating bond trades.

The AFR said its investigation had uncovered "multiple discrepancies" in the information reported to AOFM, which raised questions "about how widespread workplace and trading issues were within the bank's markets division."

It was reported by the AFR that an internal ANZ email attributed the mistakes to "spreadsheet errors" made by support staff in Bangalore. Other mistakes reportedly included counting repurchase transactions, incorrectly classifying particular sales in certain geographies, and assigning trades to the wrong business units. Another error was allegedly ANZ's purchase of bonds directly from the AOFM through weekly auctions as domestic institutional investors.

The AFR reported that on 15 August, ANZ staff wrote to the AOFM and stated that the bank had "identified some deficiencies in the data around the volume, size and allocation previously provided."

Time will tell what the fallout of this will be for the bank.

ANZ share price snapshot

Since the start of 2024, the ANZ share price has risen by 14%, compared to 3% for the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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