Unlike its larger rival, Westpac, the ANZ Bank revealed that it will pay shareholders an interim dividend – 25 cents a share – reversing the deferral decision taken several months ago at the height of the initial surge in COVID-19 infections and lockdowns.
The interim is 69% lower than last year’s payment of 80 cents a share and came after APRA, the key regulator, relaxed its ban on capital management moves by banks and insurers to a position where the companies have to be very careful in assessing a payout.
Westpac this week canceled its interim and is not expected to pay a final in November.
The ANZ will also have to decide if it will be paying a final. Both banks, along with the NAB, balance their 23019-10 financial years on September 30 and determine their payouts in late October/early November.
The ANZ’s decision to pay a smaller interim than in the past came despite the bank providing an extra $500 million in provisions for bad loans and a warning that the coronavirus crisis is not over by any measure.
Around half the new provisions was set aside for individually assessed loans, with the remainder used to strengthen its bank’s overall credit reserves.
ANZ revealed the dividend payment in a third-quarter trading update that revealed unaudited cash profit from continuing operations of $1.5 billion in the three months to June.
CEO Shayne Elliott said the economic outlook was not as weak as a few months ago, with unemployment now expected to peak at a lower level, but with so much economic uncertainty, it was prudent to set more funds aside possible future problems.
“At a time like this, when there’s lots of uncertainty and nobody really knows what the future holds, it’s pretty prudent that we should put a lot of money into the rainy day fund,” Mr. Elliott he said in an interview with inhouse ANZ website Bluenotes.
Mr. Elliott said the lender had gained market share in home mortgages during the quarter and seen a strong performance in its markets division, but he warned the virus crisis would not be resolved soon.
“You only need to look at the reintroduction of community lockdowns in Victoria and Auckland to realise we all still have a way to go before this virus is behind us. There will be more challenges along the way, however I’m confident Australia, New Zealand and the key Asian countries where we operate are well placed to lead a global economic recovery,” Mr. Elliott said.
The ANZ did not provide a quarterly profit update for the same period last year. But the result was significantly higher than the $707 million quarterly average earnings over the March half of 2019-20, which featured higher bad debt charges.
ANZ’s profit and the dividend got the thumbs up from the market with a 3.3% gain to $18.84.
