UPDATE 2-ANZ defers interim dividend decision, first-half profit slumps 60%


SYDNEY (Reuters) – Australia and New Zealand Banking Group Ltd (ANZ.AX) deferred its dividend decision and posted an almost two thirds plunge in first-half profit on Thursday, as loans-loss charges escalated due to the coronavirus pandemic.

FILE PHOTO: An ANZ bank logo is pictured in Sydney, Australia April 23, 2018. REUTERS/Edgar Su/

After maintaining an 80 Australian cents per share interim dividend since 2016, ANZ is the first of the “Big Four” to heed the regulator’s directive to defer the distribution of capital to investors until there is greater clarity regarding the economic impact of COVID-19.

Earlier this month National Australia Bank (NAB.AX) decided to raise extra capital and still spend more than A$850 million ($556.50 million) in dividends, fearing investors who depended on the income could dump the stock.

ANZ, the fourth-largest lender and one of the better capitalised banks after recent divestments, said it would update investors about its dividend decision in August.

“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,” ANZ Chairman David Gonski said.

“This decision is not about our current financial position and ANZ has not received any concerns from APRA regarding our level of capital.”

LOAN LOSS CHARGES

The Melbourne-based lender posted a 60% fall in first-half cash profit as loan loss charges surged by A$1.7 billion, or 0.53% of gross loans, four times higher than in the previous half and higher than analyst expectations of 0.45% from a Reuters poll.

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The provision charge was higher than NAB’s but lower than the provision charge taken by Westpac Banking Corp (WBC.AX) of 0.62% of gross loans. ANZ also took a A$815 million impairment hit related to its Asian associates P.T. Bank Pan Indonesia and AMMB Holdings Berhad (AmBank).

Cash profit, which excludes one-offs and non-cash accounting items, fell 60.3% to A$1.41 billion, lower than an estimate of A$2.30 billion by seven analysts from a Reuters poll.

Bank of America Corp. (BAC.N) analysts said the result was “slightly disappointing, notably in relation to the dividend”, while Credit Suisse Group AG (CSGN.S) analysts said the “headline miss” was likely to weigh on the market initially.

“A deferred dividend decision, while likely to surprise some, was in line with our expectations,” Credit Suisse told clients in a note.

ANZ shres were 1.8% lower on Thursday morning, while the broader market was 0.97% higher.

Australian regulators have urged banks to delay dividend payouts or use buffers like dividend reinvestment plans to ensure they have sufficient capital to continue essential functions.

The banks, grappling with hefty compensation costs after years of financial misconduct and record low interest rates, now see margins threatened as a nationwide lockdown to contain the virus leads to rising unemployment, slowing business and more bad loans.

ANZ’s common equity tier 1 ratio, a closely watched measure of the bank’s spare cash, fell to 10.8% at March 31 from 11.4% at Sept. 30, 2019.



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