ANZ delivers fourth year of record profit, bumper dividend

Reuters
A man walks past a branch of the Australia and New Zealand Banking Group Ltd (ANZ) in Sydney
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A man walks past a branch of the Australia and New Zealand Banking Group Ltd (ANZ) in Sydney October 29, 2013. REUTERS/David Gray

By Jackie Range

SYDNEY (Reuters) - Australia and New Zealand Banking Group Ltd (ASX:ANZ) reaped gains from its focus on Asia to book a fourth straight year of record profits and offered a better-than-expected dividend payout, sending its shares to an all-time high.

The bumper results stoked expectations for Australia's big four banks to continue their run of record combined profits and for more lofty dividends. Shares for Commonwealth Bank of Australia (ASX:CBA) and Westpac Banking Corp (ASX:WBC) also hit record levels on Tuesday.

"(The banks) are still cutting costs, so I think that it's a good sign, and also asset quality is still pretty stable and ANZ in particular, they are getting in the volume growth, so it's all still good," said Bell Potter analyst T.S. Lim.

ANZ posted an 11 percent rise in full-year cash earnings to A$6.5 billion (3.8 billion pounds), just ahead of an average analyst projection of A$6.4 billion. Cash earnings exclude one-off and non-cash items and are a measure of profitability closely watched by investors.

In addition to cost cuts and a drop in bad loans, its earnings were underpinned in part by a 15 percent rise in profit for the bank's international and institutional banking division - a result that Chief Executive Michael Smith said underscored how ANZ's focus on Asia was paying off.

The country's third biggest bank by market value announced a final fully franked dividend of 91 Australian cents, which compares with expectations of 84 cents per share from UBS. That takes its total 2013 dividend payout to 164 Australian cents a share, up 13 percent from the previous year.

Its shares hit a record high of A$34.06 though they later gave up a bit of those gains to trade 1.4 percent higher. The S&P ASX 200 benchmark index (.AXJO) was down 0.6 percent.

ASIA PAYS OFF

ANZ has stood apart from rival domestic banks by seeking to position itself as a pan-Asian player like HSBC Holdings Plc (LSE:HSBA) and Standard Chartered Plc (LSE:STAN).

"Our positive medium-to-long term view on the Asian expansion strategy is strengthened by a strong second half 2013 performance with earnings up 21 percent compared to (the) first half," said Morningstar analyst David Ellis.

While its main focus in Asia is on institutional banking, it also has retail operations. It has shown some interest in acquiring Hong Kong family run Wing Hang Bank Ltd though the ardour of early potential suitors may have cooled due to a stiff asking price, sources have said.

Smith declined to comment on specific acquisitions but said that prices in Asia, especially in Hong Kong were too high.

In Indonesia, Mizuho Financial Group Inc (TYO:8411) has approached ANZ to buy its 39.2 percent stake in PT Bank Pan Indonesia Tbk (Panin) (JKT:PNBN) valued at around $570 million, sources previously told Reuters.

Australia's new capital rules make minority interests inefficient, Smith said. "We have said minority stakes should either be a route to full control or there for strategic reason in terms of a regulatory barrier."

Given ANZ's business in Indonesia beyond Panin is strong and of a reasonable size, Smith said: "We don't need Panin anymore. So the decision for Panin is either we buy it out or we sell it."

ANZ's earnings were also helped as provisions for bad and doubtful debts dropped 5 percent to A$1.19 billion, while those for gross impaired assets fell by 18 per cent.

Group net interest margin, traditionally a measure of core bank profits, fell 8 basis points. Analysts were anticipating a decline as ANZ's expansion into Asia is changing its business mix to focus more on trade finance for its customers, which has lower margins than traditional term lending.

Australia's big four banks, which also include National Australia Bank Ltd (ASX:NAB), are on track to report an 8.5 percent rise in combined full-year cash earnings to A$27.1 billion, their fifth straight year of record profits.

Both NAB, which reports on October 31 and Westpac, which reports on November 4 are expected to report record full year earnings. Commonwealth Bank, which reported record annual earnings in August, will release its first quarter performance on November 6.

(Editing by Edwina Gibbs)

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