The ANZ Group Holdings Ltd (ASX: ANZ) share price is down after the bank announced a $196 million Suncorp Bank charge.
ANZ recently acquired Suncorp Bank from Suncorp Group Ltd (ASX: SUN) on 31 July 2024.
Suncorp Bank acquisition charge
ANZ announced its 2024 financial year’s second half statutory and cash profit will be impacted by an estimated charge after tax of $196 million related to one-off acquisition accounting-related adjustments.
This will result in a net 2 basis point (0.02%) reduction to ANZ’s level 2 common equity tier 1 (CET1) capital.
ANZ reassured investors by saying the acquisition accounting adjustments had no impact on the assessed value of the acquired Suncorp Bank business nor the purchase price paid.
There are two parts to the charge.
First, an accelerated software amortisation charge of $36 million, or $25 million after tax. This accelerated amortisation charge aligns Suncorp Bank’s software capitalisation policy to ANZ’s.
Second, ANZ reported a collectively assessed credit impairment charge of $244 million (or $171 million after tax).
After completing the acquisition, Suncorp Bank’s lending portfolio was consolidated into ANZ. The major ASX bank share is required to recognise the loans from the Suncorp portfolio without acknowledging Suncorp’s pre-existing provisions for expected credit losses (ECL).
ANZ then had to establish an ECL allowance for the acquired portfolio using its own methodology.
ANZ said that since it could not recognise the existing Suncorp Bank ECL under accounting rules, the initial carrying value for that portfolio increased, leading to a proportional reduction in acquisition-related goodwill.
In other words, ANZ’s shareholders have not missed out, it’s just an accounting adjustment.
The bank said it does not reflect a change in the credit quality of the portfolio, and it’s a one-time charge.
Final thoughts on the ANZ share price
While the ASX bank share has reported a credit charge, it doesn’t seem to ultimately affect the ANZ’s overall financials.
After a big increase of the ANZ share price – 28% in the last year – I don’t think it’s a good buy now because its valuation and earnings multiple has increased.
There are other ASX dividend shares I’d rather buy first.
