Australia and New Zealand Banking Group (ASX: ANZ) reported its 2018 half-year (HY) result for the six months to 31 March 2018 this morning.
ANZ is one of Australia’s largest businesses and a member of the ‘Big Four’ banking group, along with Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB).
Here are some of the news highlights from ANZ’s report:
- Continuing cash profit up 4.1% to $3.49 billion
- Reported cash profit up 14.2% to $3.32 billion
- Net interest margin (NIM), a key banking profit statistic which is the margin it makes between the deposits it holds and loans it gives, decreased from 2% last year to 1.93% this year.
- Dividend maintained at 80 cents per share
ANZ said that this result demonstrated continued progress in its transformation to build a simpler, better capitalised, better-balanced bank.
ANZ pointed to the Common Equity Tier 1 Capital Ratio (CET 1) improving by 0.9% to 11% as a sign of this improvement. The CET 1 is a measure to compare how much capital a bank has in reserve, or how safe it is.
The bank also improved its ‘Return on Equity’ from 11.6% to 11.9%, which is another measure of how profitable a company is for how much money shareholders have put into the business.
ANZ Chief Executive Officer Shayne Elliot said: “We have increased the allocation of capital to our higher performing businesses, delivered on our simplification promise by divesting non-core assets, reduced product complexity and continued to reshape our workforce so we can better respond to changing market dynamics.”
The bank has been focusing its efforts on “building a superior banking experience” by partnering with Fitbit Pay & Garmin Pay, and eftpos on Apple Pay and Android Pay. ANZ has also introduced a new banking app which it proudly states is currently the top-rated banking app on the Australian Apple store.
Over the past decade, ANZ had a somewhat unique strategy of expanding internationally into other Asian countries but has begun to shift its focus back to Australia and New Zealand.
During the half year it sold six of its Asian businesses. However, management noted that it still has an institutional banking presence in 15 markets in Asia and has been named as a top four corporate bank in Asia and number one for overall quality.
We are now benefiting from a more focused organisation with sector-leading capital and improving returns. – Elliot
Outlook
Mr Elliot said that ANZ expects revenue growth in the second half of the 2018 financial year to be constrained because of intense competition and increased regulation.
He said high levels of household debt and low wage growth will mean consumers remain cautious. He expects the difficult trading conditions to continue for the foreseeable future.
He also said that the Royal Commission into financial services in Australia will have an impact on the sector. Mr Elliot said that banks will learn from the inquiry and take real action to restore trust in the community.
Investors appear to like what ANZ reported, with the ANZ share price up 1.51% after midday according to Google Finance.
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