A day after Westpac produced a weak result that didn’t fool the market and suggested the long bank boom was over, the ANZ has hammered a huge nail in the coffin by revealing plans to slash shareholder payouts this year for the first time since the GFC.
Westpac lifted its interim payout one cents to 94 cents a share- no such joy for ANZ shareholders as the bank slashed the expected total payout for this financial year.
In fact ANZ shareholders face a sharp an 11.6% slide in income this year from their holdings in the bank as a result of a significant fall in earnings, a blowout in bad debts, and expectations of more to come.
Westpac’s weak report, especially a 96% surge in impaired assets over the year, triggered a sell off in bank shares on Monday, which also saw ANZ shares fall 2.2% to $23.73.
The ANZ’s report this morning and its shock hit to shareholders will put the sector under further pressure ahead of the NAB reporting on Thursday.
The ANZ Bank revealed a sharp fall in cash earnings and slashed its interim dividend as warnings of a surge in impaired loans hit hthe bottom line for the six months to March 31.
The bank said cash profit fell 24% to $2.782 billion, with the interim cut 7% to 80 cents a share, as the bank positions its payout ratio to 60%-65% of profit. The interim was equal to an 80% payout ratio
The bank said the final dividend would be similar in size to the slimmer interim (ANZ paid out 86 cents a share as the interim in 2014-15).
Seeing the bank paid a final of 95 cents a share in 2014-156, it means shareholders will lose 15 cents a share with that payment, making the total loss for the 21 cents. Total payout for 2016-16 will be around $1.80 a share.
The ANZ defended the cut in this morning’s announcement, saying the reduction “provides a conservative, sustainable and fully franked dividend base for the future. The Final Dividend for FY16 is expected to be at least the same as the Interim Dividend in cents per share.”
"The result reflects a strong performance in ANZ’s Australian and New Zealand consumer and small business franchises and challenging market conditions in Institutional Banking including higher provisions in the resources sector and in related industries.
"Significant progress was also made in streamlining and simplifying ANZ to ensure the bank is future ready. This included a particularly strong expense management outcome, improved capital efficiency and initiatives to accelerate momentum and deliver future benefits including a restructuring charge and a change to the application of accounting policy to accelerate software amortisation,”the bank said in this morning’s statement.
The ANZ reported a $717 million “net charge primarily related to initiatives to reposition the Group for stronger profit before provisions growth in the future.”
The ANZ issued two warnings earlier this year on a blow out in impaired assets resulting mostly from problems with customers in the resources sector (Arrium was one). The second warning indicated the final figure would be well above the $510 million for the first half of 2014-15.
This morning the bank reported “The total provision charge of $918 million ($892 million individual provision charge $26 million collective provision charge).” That was a jump of 80%. Westpac’s figure was $667 million, up 96% from a year ago.
