Forget all the media and some commentary hyping the NAB full year result yesterday – the 2% slide in the bank’s share price exposed that for the rubbish it was. Look instead to the just released full year figures for the ANZ – they are not good, with the barest of profit rises and an unchanged final dividend – all pointing to just how tough conditions are for these still very profitable enterprises.
In fact there’s a real sign of a slowdown in the second half in the ANZ in its institutional and international banking business as higher market volatility hit hard.
Many commentators failed to fully analyse the NAB’s figures and once that was done the profit rise excluding all those one off items was 3% or a bit more at best, with falling profit margins and indifferent revenue gains.
The ANZ result was a replay of that – cash earnings up 1% for the full year to $7.26 billion, a record and was struck off a 5% rise in revenue to more than $21 billion. Statutory profit rose 3% to $7.5 billion, but bank analysts and most investors work off the cash figure.
Full dividend for the year is $1.81, up 2% because of a 4% rise in the interim to 86 cents a share.
In a statement to the ASX, ANZ says its Australian bank had continued its trend of cash profit improvement with profit growth of 7%, driven by growth in customer numbers and increased product sales and market share. But in its international and institutional bank, cash profit was down 2%. Profit in the global wealth division was up 11%.
The ANZ said its total provision charge increased to $1.2 billion, or 22 basis points, but loss rates remain “well under the long term average having risen from their historically low levels". Customer deposits grew 10% while net loans and advances were up 9%.
First half cash earnings were up 5%, meaning there was a slowdown in the second half to get to that tiny 1% rise.
The bank’s costs jumped sharply – rising more than half a billion a dollars and helping trim the net interest margin to 2.04% from 2.13% – a bigger fall of 9 points and double the NAB’s fall of 4 points to 1.87% the cost to income ratio rose to 44.4 cents in the dollar from 43.7 cents in the dollar. Return on equity fell to 14.5% (still very solid) from 15.8%. That’s a fall that will alarm analysts.
Watch the ANZ’s shares come under some pressures today, despite the surge on Wall Street. The full year result is solid, but not the sort of report that will see traders stampeding into the stock.
Like the NAB, the steady final dividend from the ANZ seems to be carrying two messages – the first is that the outlook is uncertain thanks to the higher demands for capital from regulators and the weak economy and fading housing boom. But there’s also a PR image factor – after stinging mortgage holders last week, both banks have given the impression shareholders will pay a small part of the cost of the higher capital demands from regulators – unlike Westpac and its 2 cents a share lift in its final dividend.
