ANZ's 1st Half Profit Falls, Announces A$2 Billion Buyback — Update

By Alice Uribe

SYDNEY--ANZ Group Holdings reported a 4% fall in interim profit, but boosted its dividend by almost 2.5% and announced a share buyback as its capital position remained strong.

The Australian lender said Tuesday its net profit totaled 3.40 billion Australian dollars (US$2.25 billion) for the six months through March. Consensus forecasts compiled by FactSet projected ANZ's first-half profit would be A$3.60 billion.

ANZ said it intended to buy back up to A$2 billion of shares on-market. It said it expected this will reduce its Common Equity Tier 1 capital ratio--a key measure of a bank's ability to withstand financial shocks--by approximately 46 basis points. For the first half, ANZ's CET1 ratio was 13.5%, up 6 basis points on September.

"The board has determined that a share buyback is appropriate taking into account the group's strong capital position," ANZ said.

ANZ declared an interim dividend of A$0.83 a share, up from A$0.81 a year earlier.

Cash earnings--a measure closely tracked by analysts that strips out non-core items such as revenue hedges and treasury shares--fell by 7% to A$3.55 billion. Cash return on equity was 10.1%, down 42 basis points from the second half of fiscal 2023.

ANZ's Australian Retail division reported a A$794 million cash profit, down 25% on a year ago, but falling a shallower 9% on the second half of fiscal 2023.

The lender said key drivers of the result included above-system home loan growth with pricing above cost of capital as well as low credit impairments and larger customer deposits.

Australian lenders have benefited from the rising interest-rate environment over recent times. But competition to write new mortgages has crimped margins at the same time as lenders faced funding cost pressures. There are signs that mortgage competition may be abating. Westpac on Monday signaled that the impact of competition on mortgage margins had moderated in its first half.

Over the past six months, ANZ's group net interest margin--the difference between the interest income generated and the amount of interest paid out to lenders--fell 2 basis points to 1.63%.

ANZ's Institutional unit was a standout, posting a A$1.52 billion cash profit, down 4% on a year ago but 12% higher than the prior half. The lender attributed this to an increase in markets income driven by higher customer activity and favorable trading conditions.

Chief Executive Shayne Elliott said the domestic and international environments are expected to remain challenging across the remainder of the year.

"The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally," he said.

Write to Alice Uribe at alice.uribe@wsj.com

(END) Dow Jones Newswires

May 06, 2024 18:47 ET (22:47 GMT)

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