ANZ 1st Half Profit Flat; Dividend Increased — Update

By Alice Uribe

SYDNEY--ANZ Group said its interim profit was flat when compared to the previous year, but boosted its dividend by almost 13%, driven partly by improved home loan growth.

The Australian lender said its net profit sat at 3.55 billion Australian dollars (US$2.38 billion) for the six months through March. Consensus forecasts compiled by FactSet projected ANZ's first-half profit would be A$3.83 billion.

Cash earnings--a measure closely tracked by analysts that strips out non-core items such as revenue hedges and treasury shares--rose by 23% to A$3.82 billion compared to the previous year.

The bank declared a final dividend of A$0.81 per share, compared with A$0.72 a year earlier.

"This was a strong financial performance in which all four divisions made a material contribution," said Chief Executive Shayne Elliott. "The record result was driven by solid revenue growth across the board and the benefits of having a well-diversified business."

Revenue in the lender's institutional unit was up 35% on the previous year, which ANZ attributed to its focus on payments processing and servicing of other financial institutions. In the Australian Retail division, revenue was up 11% versus the previous year, which ANZ said was partly due to better home lending momentum from the previous half.

"Australia Retail grew home loans faster than the market, while also driving good growth in deposits," said Mr. Elliott.

ANZ, like other lenders, has benefited from the rising interest rate environment. The Reserve Bank of Australia this week surprised financial markets, raising its official cash rate by 25 basis points to 3.85% after a policy meeting Tuesday, resuming an aggressive campaign of increases after pausing in April.

But some analysts see that mortgage competition, particularly in refinancing, may crimp future margins and earnings into the future. At the same time, banks may also see pressure on credit quality, as customers grapple with higher mortgage repayments, inflation-related cost squeezes.

For the first half, ANZ's group net interest margin--the difference between the interest income generated and the amount of interest paid out to lenders--was 1.75% versus 1.58% the year before.

Still, Mr. Elliott warned that the next six months would be more difficult than the last.

"Competition in retail banking is as intense as it has ever been, both in Australia and New Zealand. We understand that sustained higher inflation and interest rates create further challenges for some households and businesses across the economy," he said. "While the number of ANZ customers in difficulty remains low, we stand ready to help in these potentially challenging times."

ANZ's Common Equity Tier 1 capital ratio--a key measure of a bank's ability to withstand financial shocks--was 13.2%, up 89 basis points since September.

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

(END) Dow Jones Newswires

May 04, 2023 18:45 ET (22:45 GMT)

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