The ANZ Bank, after revealed the 18% lift in 2016-17 cash profit to $6.94 billion and has hinted that its is looking at handing cash back to shareholders in the form of a buyback.
Net or statutory profit, which includes one-off items and other charges, rose 12% to $6.406 billion. ANZ shares fell 1.3% to $30.13.
And while final and full dividends have been held at $1.60 and 80 cents a share respectively, there is now a suggestion (as some analysts have predicted) that shareholders could benefit from a buyback with the bank’s capital meeting regulator requirements to be “unquestionably strong”.
CEO Shayne Elliot said the bank’s healthy capital position meant a buyback could be on the cards as it offloads Asian operations along with superannuation and life insurance businesses in Australia and New Zealand.
“As we sell things we get the funds and so what we’ve said is there’s no real incentive for us to sit on lazy capital,” Mr Elliott said in a company hosted interview released yesterday.
"So when we do get those proceeds – and we haven’t really received that money from any of those sales just yet – when we do, we would be in a position to consider returning that to shareholders."
ANZ lifted its common equity Tier 1 capital ratio 0.96 percentage points to 10.6% – above the Australian Prudential Regulation Authority’s 10.5% ’unquestionably strong’ benchmark that banks have until 2020 to reach.
ANZ’s operating income fell one per cent to $20.273 billion, but costs fell for the first time since 1999, Mr Elliott said thanks to job cuts and the loss of staff and assets in Asia and Australia.
The bank’s cost to income ratio fell to 45% from just over 50 in 2015-16 (which was boosted by high one off items, weak revenue and the fall in profits).
Mr Elliott said revenue growth was getting harder to come by amid increasing competition for consumers, which showed the value of refocusing on Australian and New Zealand retail banking.
“That’s why we have been transforming ANZ, getting ready for that. We are at the mid-point of executing a multi-year transformation of ANZ," Mr Elliott said.
“What’s most pleasing about 2017 is we have not only delivered better outcomes for shareholders, we are also making genuine progress in delivering better outcomes for customers and in rebuilding community trust,”he added.
But he and the interview skated over the real driver of earnings – the 39% slide in charges for impaired loans. That was a $757 million drop in the provision which in turn allowed the bank to boost earnings. the total provision fell from $1.9 billion a year ago to around $1.2 billion.
Cash earnings remain well under the peak of $7.2 billion hit in 2014-15 (the share price was $28.48 two years ago this week when that result was announced against $30.13 yesterday).
Return on equity of 11.9% is well under the peak of 15.4% in 2013-14.
The equivalent of more than 1600 full-time staff were cut from the bank in the past year, mostly in its offshore Asia retail and Pacific division and mostly due to asset sales. ANZ reported $278 million in restructuring expenses for the year.
The bank said its net interest income (NIM) fell $223 million, which is said was largely due to a fall in the NIM of 8 basis points to 1.99 cents in the dollar from 2.07 cents.
That had been led by margin pressure in competition for deposits (rising rates)and lower earnings from capital, although it did make back some ground through the higher rates it was now charging interest-only and investor borrowers. The latter factor will be present for all of 2017-18 and will relieve some of the pressures.
