In many respects the ANZ’s 2010 results yesterday was a carbon copy of the NAB’s earnings news the day before.
A 40% drop in bad debts, a sharper than expected jump in earnings (past the NAB) and a higher dividend.
And the market result, a solid rise in the share price as previously sceptical investors hopped on the bank express.
ANZ shares jumped over 3% at one stage yesterday after the release of the results which showed the bank posted a record $5.133 billion cash profit in 2009-10.
They ended up 2.9%, or 63c at $24.73.
That was sharply up on the $4.58 billion cash profit reported by the NAB on Wednesday, which followed a similar 40% drop in bad debts.
The final dividend of 74 cents, fully franked was up 32% from the final for 2009 of 56c.
That took the payout for the year to $1.26, a share with the 52c interim (46c in 2009). A total of $1.02 a share was paid in 2009.
The 2010 total is still below the high $1.36 a share paid in 2007 and 2008, nor is it as high as the $1.25 a share paid in 2006 financial year.
The ANZ topped market forecasts and Goldman Sachs told clients to expect upgrades to consensus earnings of between 5%-10% because analysts were currently forecasting a relatively flat 2011 pre-provision earnings growth.
Goldman Sachs said the "strong" result was built on strong revenue growth from the bank’s New Zealand operations, institutional division’s re-pricing of loans, and the bank’s continued expansion into Asia.
Goldman Sachs said "Australia’s revenue trends were the weakest given further margin compression," while Citibank analysts wrote that ANZ was leading its peers and that loan rates had improved in all key businesses,” GS said.
ANZ chief executive Mike Smith said the Australian economy was running at multi-speeds, but was becoming ‘‘more normal’ and he expected corporate lending volumes to rise in the first half of fiscal 2011.9 As does the NAB).
"We continued to see momentum in our underlying business in the second half of the year which positions us well for a good start to 2011," Mr Smith said.
"The backdrop however is continuing uncertainty in the global environment, particularly in the US and European economies which are struggling to achieve ‘escape velocity’ and to address the major structural challenges they are facing.
"At the same time, higher funding costs are here to stay and there are regulatory uncertainties associated with new capital and liquidity requirements.
"With global economic growth likely to continue to be soft over the medium term, in all, this remains a challenging environment to navigate.
"In 2011, we expect Asia ex Japan to grow at around 8% compared to less than 2.5% in the US and Europe.
"Australia is expected to continue to perform well and in New Zealand the recovery is gathering momentum which also gives us upside and positions us well for 2011," Mr Smith added.
The cash earning result beat consensus estimates by more than $200 million.
ANZ’s underlying profit increased 33 per cent to $5.025 billion and the statutory profit increased 53 per cent to $4.501 billion, of which $509 million cam from its Asia-Pacific operations.
Mr Smith reiterated that ANZ expected 20 per cent of its net income to be generated by the Asia-Pacific unit by 2012.
ANZ’s net interest margin climbed to 2.47 per cent during the 12 months from $2.31. Excluding its global markets business, the net interest margin was 2.75%, up from 2.47% in 2009.
The banks costs rose faster than income, but nowhere near as noticeable as at the NAB.
The ANZ said its cost to income ratio was 46.5%, up from 45.7%
Underlying second half profit was $2.73 billion up from $1.86 billion a year ago.
ANZ’s credit provision charge dropped by 41% to $1.8 billion.
ANZ is the only bank among Australia’s big four lenders whose shares have risen so far this year and have outperformed the broader market, with a gain of just over 5% better than the 4.5% fall in the overall market.
Big investors like the Asia expansion story, with news of a big move into South Korea expected to be confirmed by year’s end.
