The ANZ Group Holdings Ltd (ASX: ANZ) share price is in focus as investors scrutinise the FY23 result. There was a huge dividend declared.
FY23 result
Here are some of the highlights from the 12 months to 30 September 2023, compared to FY22:
- Cash profit up 14% to $7.4 billion
- Statutory profit slightly down to $7.1 billion
- Gross loans and advances up 5% to $710.6 billion
- Customer deposits up 4% to $647.1 billion
- Final, partially franked, dividend per share of $0.94 per share (up 27%)
- Full year dividend of $1.75 per share, up 20%
The final dividend is partially franked at 56%. ANZ said that the level of franking reflects the geographically diverse nature of its business, as well as the timing of the proposed Suncorp Group Ltd (ASX: SUN) Bank transaction.
ANZ’s board recognise that lower franking may not have been anticipated by some shareholders, so its dividend was $0.13 per share bigger than it otherwise might have been.
How is the loan book performing?
ANZ said that the total credit provision for the full year result (on a cash continuing basis) was a net charge of $245 million.
The bank showed that its (home loan) arrears are rising, but not at a worrying pace. I believe the ANZ share price could be heavily influenced by the performance of arrears in FY24.
The ANZ CEO Shayne Elliot said:
The external environment is likely to remain challenging. The full impact of higher interest rates is expected to continue to impact economic activity as well as household and business budgets.
Despite these challenges, we expect the economy will be supported by strong household savings, resilient housing markets, low unemployment, solid business investment intentions and strong migration in Australia and New Zealand.
Our customers have so far proven resilient, with a relatively low level of delinquencies despite the current interest rate tightening cycle. That said, we know circumstances can change quickly.
Balance sheet strength and Suncorp progress
ANZ said that its capital position remains strong, with a common equity tier 1 (CET1) ratio of 13.3%, an increase of 16 basis points (0.16%) since March 2023. That includes capital being held for the proposed acquisition of Suncorp Bank.
ANZ has filed an application with the Australian Competition Tribunal to review the ACCC decision to block the acquisition. A decision is expected in February 2024.
If the application is successful, completion would be subject to approval from the Federal Treasurer and the passage of legislative amendments by the Queensland Parliament.
Final thoughts on the ANZ share price
Overall, this seemed like a solid result, with improvements in the return on equity (ROE), return on average assets and net tangible assets (NTA) per share.
With all of the uncertainty with what’s going to happen next after all of the interest rate rises, I don’t think ANZ is a good buy today. Its lending margins are being squeezed by competition – that competition isn’t going away, it seems.
There are other ASX dividend shares which I believe can deliver better long-term profit growth, so I’d look at other opportunities at the current prices.
