New | ANZ Bank posts record first half profit, but tough times in earnings growth looms
Australia and New Zealand Banking Group on Tuesday announced a lower-than-expected dividend and warned of tough times ahead for earnings growth, after posting a record first-half profit driven by home loans and Asian earnings.
Australia’s No. 3 lender said "occasional volatility and shocks" in earnings could not be ruled out, with Australia’s economy expected to remain sluggish in 2015 after below-trend growth of 2.5 per cent last year.
"This environment presents some challenges, however we are confident about the benefits of our super-regional strategy over the longer term," Chief Executive Mike Smith said, referring to ANZ’s investments in emerging Asian economies like Indonesia.
ANZ’s numbers are likely to fuel concerns about the earnings outlook for Australia’s highly profitable major lenders, after larger rival Westpac Banking Corp on Monday missed first-half profit forecasts and announced its smallest dividend rise in 6-1/2 years.
Investors’ worries about Australian lenders’ heavy reliance on mortgages, coupled with the risk of rising bad debt and stricter capital rules, has seen bank stocks under-perform the broader S&P/ASX 200 index so far this year.
ANZ said cash profit rose to A$3.7 billion (US$2.90 billion) for the six months ended March 31, compared with A$3.4 billion a year ago and a A$3.6 billion estimate from six analysts surveyed by Reuters. Profits at its Asia business jumped 18 per cent.
It declared a dividend of 86 cents per share, 1 percent below consensus estimates, and said it expected to maintain a payout ratio for the current financial year toward the upper end of 65-70 per cent of cash profit.
"There was no growth in the business after excluding forex translation," said Omkar Joshi, who helps manage A$1 billion at Watemark Funds Management. "The trends from here in regards to net interest margins, capital and bad debts do not bode well for ANZ or its peers."
Like Westpac, loans more than 90 days past due at ANZ spiked during the half, suggesting potential for further stress as Australia’s economy struggles to switch gear following a commodities-fuelled investment boom. In a bid to cut its capital requirements, ANZ on Monday said it was looking to sell its car and equipment finance business.
National Australia Bank, the country’s No. 1 lender by assets, will report first half numbers on Thursday, while Macquarie is set to announce annual results on Friday.
Commonwealth Bank of Australia follows a different calendar and posted its first-half results in February. It will report third-quarter earnings on Wednesday.
