The ANZ Bank has deferred its interim dividend after reporting a sharp fall in half-year earnings and a surge in bad debt provisions as it prepares to confront the financial cost of the lockdowns associated with the fight to control COVID-19. But there is no new capital raising as there was with the NAB on Monday.
“ANZ’s Board … determined it will defer its decision on the 2020 Interim Dividend until there is greater clarity regarding the economic impact of COVID-19,” the bank said in its announcement on Thursday morning.
It paid 80 cents a share fully franked a year ago and a 70% franked final of 80 cents a share late last year.
In deferring the interim, the ANZ joins the smaller regional bank, the Bank of Queensland and has not followed fellow Melbourne peer, the National Australia Bank in cutting its interim by 60% to 30 cents a share.
“This decline was driven primarily by credit impairment charges of $1.674 billion that included increased credit reserves for COVID-19 impacts of $1.031 billion.
“The valuation of investments in Asian associates was impaired by $815 million, largely due to the impact COVID-19 is having in those markets,” ANZ said.
The bank is owed more than $A250 million by a collapsed Singapore oil trader and tanker owner.
The ANZ said statutory after-tax profit fell 51% to $1.55 billion, for the six months to March 30 from the same period in 2018-19.
Cash Profit from continuing operations was $1.41 billion, down 60% from the prior comparable period.
The ANZ said the Common Equity Tier 1 Capital Ratio is 10.8% at March 31, 2020. Return on Equity decreased to 4.7%.
The solid capital position seems to be why it (like Westpac) will not be following the NAB into a capital raising. The NAB raised $3 billion easily this week from the market.
ANZ Bank shares jumped more than 6% on Wednesday – the lack of an issue in Thursday’s announcement confirms the accuracy of that market move.
CEO Shayne Elliott said in the announcement:
“This was a reasonable result given the tough trading conditions being experienced before the crisis hit. We maintained our focus on productivity and continued to target balance sheet growth in our preferred segments. Loan losses heading into March were at historically low-levels and we are well-positioned to manage the higher credit charges taken as a result of COVID-19.”
In relation to the deferral of the dividend, the bank said in the statement:
“In assessing options, ANZ considered the high level of uncertainty in the economic outlook as well as guidance from the Australian Prudential Regulation Authority (APRA) that all Authorised Deposit-Taking Institutions and Insurers should seriously consider deferring decisions on dividends until the outlook is clearer.
“As part of its regular engagement with APRA, ANZ has also had ongoing discussions regarding both its capital position and various stress testing scenarios,” the bank added.
