Market Sells the Fact with ANZ

For the ANZ it looks like a case of ‘sell on the news’ and take profits after the shares dipped yesterday in the wake of a solid recovery in interim earnings and a higher dividend.

The shares eased 3.2% to $27.90, down more than $1.20 from the most recent high on Monday of $29.10.

Up to Wednesday ANZ shares had jumped 25%, continuing the surge that really started last November.

With a cautiously upbeat outlook from CEO, Shayne Elliott, a rise in the share price might have been in prospect, especially after local investors shrugged off Wall Street wobbles on Tuesday, especially in tech stocks.

What made the weakness even odder was the clear outperformance by the bank in the six months to March 31, as it topped market forecasts for profits and the size of the dividend.

What did worry some investors was the size of the write-back to the P&L line of $491 million of the $1.7 billion in provisions from the first half of 2020.

ANZ reported a statutory profit after tax of $2.943 million and cash earnings from continuing operations of $2.990 million.

This was up 45% and 28%, respectively, on the second half of FY 2020 (first half comparisons are skewed by the huge one off provisions in the first half of 2020).

Boosting ANZ’s result was that write back (or a net credit provision release) of $491 million for the half. This is up from a net release of $150 million during the first quarter.

Interim dividend of 70 cents a share was above the 60 cents a share forecast from most analysts.

CEO Shayne Elliott, advised that all sides of the business performed well, which was complemented by cost reductions.

In a statement he said the outlook was still not clear:

“There is still significant uncertainty. You only need to look at how the pandemic is playing out overseas, as well as recent lock-downs, to realise how quickly the situation can escalate.”

“ANZ is in a strong position both financially and operationally. We are well capitalised and our disciplined approach to costs over many years has us well placed to invest in opportunities to grow our business in targeted segments.

“The work to digitise core processes and platforms continues at pace and this will be more visible to customers towards the end of the year.

He said: “Following the trends of the first quarter, all parts of our business performed well. Costs were down 2% and we also increased investment in new digital capability that will provide ongoing productivity improvements and better customer outcomes.”

“Australia Retail & Commercial had another good half, becoming the third largest home lender in the market. Deposits performed well, with retail and small business customers behaving prudently by building solid savings and offset balances through the half,” he added.

The fall in institutional bank revenues was in line with expectations as Mr Elliott explained:

“Lower revenues in our Institutional business were largely expected due to the impact of falling interest rates as well as a normalisation of Markets revenue after an exceptionally strong 2020.

“Our disciplined focus on credit management has been a positive with our largest customers going into the pandemic from a position of strength and adapting fast to the rapidly changing environment.”

And the New Zealand business performed strongly.

“New Zealand continued its recent strong performance with record lending growth combined with disciplined cost management. This is a well-run business that is an important part of our overall portfolio and is well-placed to manage increased regulatory capital demands.”

Unlike Westpac which is reviewing its NZ presence, the ANZ is not looking at departing that market.

…………

As opposed to the ANZ and Westpac, the two other big banks were in favour yesterday.

Shares in Commonwealth Bank closed at a six-year peak of $92.72, the highest they have been since April 2015.

National Australia Bank shares closed at $27.37 after touching an intraday high of $27.84, the highest level seen since November 2019. NAB reports first half results Thursday morning.

 

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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