ANZ misses, profit falls 18%

Photo: Ishara S.Kohikara/ AFP/ Getty Images.

The ANZ Bank posted an 18% fall in full year cash profit to $5.9 billion, dragged down by the cost of reforms, a process which includes a possible sale of its Australian wealth management business.

Analysts had expected between $6.2 billion and $6.4 billion in cash profit.

Statutory profit after tax for the year to September was $5.7 billion, down 24%, and operating income slipped 3% to $20.529 billion.

The result includes $1.077 billion of after tax charges, including restructuring and the cost of software.

The bank is cutting operating costs, exiting low return and non-core businesses and reducing
reliance on low-returning parts of institutional banking.

“In institutional banking there has also been significant progress in improving returns and building a simpler business focused on regional trade and capital flows. This included a meaningful reduction in low yielding assets and improved productivity,” says CEO Shayne Elliott.

The recent series of scandals involving banks and the appearance of the big four bank CEOs before a parliamentary committee was top of mind for Elliott.

He says the bank is making changes to ensure it is fairer in the way it deals with customers.

“The current discussion about the banking sector in Australia, however, shows that we still have more to do to shift our culture and evolve the way we do business,” he says.

Last week the bank announced a combined $360 million in additional charges including a further $100 million for restructuring.

Dividends

A final fully franked dividend of 80 cents a share was declared for a full year amount of 160 cents, a drop of 12%.

The full year payout ratio is close to 80% of cash profit but that won’t last long. The bank says it is working toward a fully franked payout ratio of 60% to 65%.

Wealth management

The bank this week announced the sale of its retail banking and wealth management business in Singapore, Hong Kong, China, Taiwan and Indonesia to Singapore’s DBS Bank.

Today Elliott announced a possible sale of the life insurance, advice and superannuation and investments businesses in Australia.

“ANZ will pursue a disciplined approach to this process and will update the market as appropriate,” he says.

Elliott says the decision to look at selling the Australian wealth business reflects a focus on how the bank can best interact with customers rather than manufacturing products.

The wealth Australia division cash profit for the year was down 24% to $327 million.

Bad debts

Gross impaired assets increased to $3.17 billion with new impaired assets up 3%.

The biggest new charge was $145 million to settle the Oswal court case to end a $2.5 billion claim over the receivership and sale of Burrup Fertilisers in Western Australia.

Elliott called the results “decent” in what he called a transitional year.

“The underlying business did well, we continue to grow market share, we continue to have more customers choose to bank with us … our cost performance was the best we have seen in 16 years,” he says.

The ANZ Bank’s 2016 results in detail:

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