So will the ANZ Bank’s (ANZ) interim profit see bank stocks reverse their sell off of yesterday after Westpac (WBC) disappointed with a weak interim financial report?
The ANZ this morning revealed an interim cash profit of $3.68 billion, up 5% on the first quarter of 2014, just above market forecasts.
An interim dividend of 86 cents a share fully franked, was declared, up 4% from a year ago.
Profit in the Australian bank was up 8% and and up 7% in the international and institutional bank.
In a statement accompanying the results, ANZ chief executive Mike Smith said for the foreseeable future, the bank “will be operating in a lower growth environment in which there will continue to be occasional volatility and shocks."
“Nevertheless, the outlook for credit quality remains relatively benign supported by low interest rates, the stimulus of a low oil price and an appreciating US dollar."
The result indicates a strong second quarter after the ANZ reported a tiny rise in first quarter cash profit to $1.79 billion from $1.73 billion.
Like Westpac, the ANZ is operating its Dividend Reinvestment program with a 1.5% discount this half year to help build capital in the face of growing pressure from regulators for the big banks to lower their leverage.
The discounted issue is likely to be well supported by investors who in the past have lapped up DRP issues, especially when discounted.
The DRP news is a sign the regulators (APRA and the Reserve Bank) campaign to get the big banks to boost their capital bases, is working.
The news will test market sentiment after the weak Westpac yesterday.
Westpac shares slumped 3.1% to $35.60 yesterday. Shares in the Commonwealth Bank dropped 1% to $88.01, NAB shares fell 1.4% to $36.29 and ANZ shares dropped 2.7% to $33.24.
ANZ result to stem bank sell-off?
Westpac reported weak earnings, a small rise in costs, a small rise in debts past 30 days and dividend increase that fell short of expectations.
Westpac also announced that it will raise an additional $2 billion of capital through a discounted share issue (1.5%) under its dividend reinvestment plan, which will be partially underwritten, as the bank seeks to arrest a decline in its common equity tier 1 capital ratio in the face of growing regulatory scrutiny over bank leverage.
Westpac has also put an end to its regular 2c increase in the dividend each half, only lifting its interim dividend by 1c on the half (3 cents on a year earlier), which also reflects growing conservatism on capital.
