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ANZ takes billion-dollar hit

Lachlan Maddock
— 1 minute read

The bank’s profits fell more than 50 per cent off the back of COVID-19, and it will defer its dividend decision until there is “greater clarity” on the pandemic’s impacts. 

ANZ’s cash profits fell 60 per cent to $1.41 billion, while statutory profit after tax fell 51 per cent driven primarily by credit impairment charges of $1.674 billion that included increased credit reserves for COVID-19 impacts of $1.031 billion. 

“This was a reasonable result given the tough trading conditions being experienced before the crisis hit,” said CEO Shayne Elliott. “We maintained our focus on productivity and continued to target balance sheet growth in our preferred segments. Loan losses heading into March were at historically low levels and we are well positioned to manage the higher credit charges taken as a result of COVID-19.”

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ANZ also deferred a decision on its interim dividend despite not receiving any concerns from APRA regarding its level of capital. 

“The board agrees with the regulator’s guidance that deferring a decision on the 2020 interim dividend is prudent given the present economic uncertainty and that making a decision at this time would not have been appropriate,” said chairman David Gonski. “This was a very difficult decision and the board considered all options available as we understand the impact this will have on those shareholders who rely on dividends.”

ANZ will make a decision on the dividend in August. 

The decision not to issue an interim dividend may mean ANZ is not forced to “sing from a similar hymn sheet” as its big four fellow traveller NAB, which was forced to slash its interim dividend to 30 cents and launch a $3.5 billion capital raising to buffer itself against COVID-19 impacts. 

Westpac’s decision on dividends remains unknown ahead of its results on 4 May.

“By deferring rather than cancelling their dividend investors may still receive some payment in the future, but won’t be known until August, when the economic, capital and credit impacts of COVID-19 are clearer,” said AMP Capital portfolio manager Dermot Ryan. “Some thought we were too bearish calling that aggregate bank dividends would at least halve at the start of the month, but banks have been prudent and need to use their organic capital generated to boost their balance sheets so they can continue lending and supporting our economy in the rebound.”

 

ANZ takes billion-dollar hit
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