ANZ 1HFY13; First Take of the Numbers

ANZ 1HFY13; First Take of the Numbers 

On first blush, headline numbers look to be particularly strong, but it’s not the headline numbers that will impress. Drilling down, the ‘efficiencies’ ANZ has extracted over the period will no doubt impress even more.
 
Adjusted net income hit $3.18 billion for the half, versus a consensus forecast of $3.13 billion and the corresponding period’s $2.89 billion results. The heavily-watched net interest margins (NIM) came bang in-line at 2.25%, which is a 10 basis point (bps) decline on the corresponding period. However, on a peer comparison with WBC (2.19% est) and NAB (2.07% est), this is still the strongest NIM of the three and should hold firm.

Return on equity (ROE) also beat expectations, up 80 bps to 15.5%, as earnings growth from efficiencies kicked in and some initial benefits from the cost reductions hit the books. The only major blemish was earnings per share at 117 cents, up 7% on the period, but this is below expectations of 118 cents.
 
However, every yield-hunting investor had come to see one thing – dividend growth. Expectations had been for an interim dividend of 68 cents; ANZ returned with 73 cents fully-franked dividend, an 11% jump on the previous period. The beat here will impress as ANZ had been expected to be moderate at best versus its peers, and this might just see it legging up on NAB and WBC. ANZ is currently lagging in last place in the current bank rally, which started back in July 2012. What might moderate the pick-up is the fact that ANZ is looking to even out the difference across the halves to be more ‘even’.
 
The major upside in the result is the efficiencies. ANZ had the biggest scope for efficiency with some of the largest cost reductions possibilities.

Provisions charges dropped 13% to $599 million, while gross impaired assets dropped 10% bring the collective coverage ratio in at 1.01% versus consensus estimates of 1.08%. This is a good underlying result and will illuminate the headline figures.
 
It is also pleasing to see ANZ’s international arm now contributing 20% of revenue, and that is expanding. Management sees the strong performance from global markets, trade and Asia Commercial as long-term positives and with increased efficiencies; these sectors can drive ANZ even further and we will wait with baited breathe to see if CEO Mike Smith and his team drive this major sectors further over the coming years.

There is no doubt the headline figure will be the dividend growth story. However, we believe the crux of this result is the improved efficiencies. ANZ still has plenty of room to move in this area, and over the coming years will need to drive the Asian and international sector particularly to offset any loss in market share in Australia.
 
It will be hard to see this result as ‘disappointing’, however it is not stellar either, as there is no major beat. It should help ANZ move higher, however with NAB and WBC reporting over the coming days, the response from the market may be muted as it looks to make an ‘informed decision’ as to which bank offers the best combined return. ANZ though has certainly put itself up onto the next rung on current information. 

ENDS

© Scoop Media