Who’s up for a swim? The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price may take a dip today as its cash H1 profit is hit by some big-ticket items.
On the back of further costs disclosed by Westpac Banking Corp (ASX: WBC) earlier this week, ANZ has released similar news.
ANZ share price
ANZ half-year profits affected by large items
ANZ’s first-half cash profit after tax will be adversely impacted by a total amount of $817 million. The bank says this is equivalent to 5% of its Common Equity Tier 1 ‘CET1’ capital. Huh, what the heck is CET1 capital?
CET1 capital represents the core capital that a bank holds. As a ratio, it can be used to determine a bank’s ability to withstand financial distress.
Prior to this announcement, ANZ advised its cash profit after tax would be reduced by $250 million as a result of a class action in the US ($48M) and losses from AmBank’s settlement with the Malaysian Ministry of Finance ($212M).
On top of this, ANZ has today disclosed the following big items.
- $251 million write-down of goodwill relating to the ANZ Share Investing business
- $135 million in equity accounted losses from AmBank
- $108 million of additional customer remediation charges
- $63 million of restructuring charges and divestment impacts
What now for ANZ
These items may look significant but remember ANZ generated $14.9 billion in revenue and has $72.3 billion in cash in FY20.
So, these ‘large’ items are probably not that big in the grand scheme of things.
Rather than overly focusing on these numbers, I think it would be better to try and value ANZ over the long term.
