ANZ Profit Drops 10% as Bank Takes $1.1 Billion Hit From Regulatory Settlement, Restructuring
Major lender posts $5.89 billion annual profit amid warnings of underperformance in key retail divisions
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ANZ Bank reported a 10% drop in annual profit Monday, weighed down by a $1.1 billion charge that included an ASIC regulatory settlement and restructuring costs as the major lender warned two of its key Australian divisions are falling short.
The bank posted a statutory profit of $5.89 billion for the year ended Sept. 30, down from $6.54 billion the previous year, according to results released Monday. Stripping out the significant items announced Oct. 31, the bank’s underlying cash profit remained flat at $6.9 billion.
ANZ Chief Executive Officer Nuno Matos acknowledged the bank faces serious performance issues in its Australia Retail and Business & Private Bank divisions, despite maintaining strength in its institutional and New Zealand operations.
“Our full year statutory profit of $5.89 billion was down 10% on the previous year’s performance, impacted by significant items of $1.1 billion as we resolved long-standing regulatory investigations, and actions taken to simplify our business,” Matos said. “While our financial performance held steady when excluding these items, our performance as a business reinforces the importance of our ANZ 2030 strategy.”
The board proposed a final dividend of 83 cents per share, unchanged from the first half, bringing the total annual payout to 166 cents partially franked at 70%.
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Retail Divisions Drag Performance
Matos drew a sharp contrast between the bank’s performing and underperforming units, saying the results “highlight three things” about ANZ’s current position.
“First, our franchise has a strong competitive position. We have two scale markets, Australia and New Zealand, two market leading positions, our Institutional and New Zealand businesses, and a well-diversified business benefitting from our strong presence in Asia, the fastest growing economic region in the world,” Matos said.
But he didn’t sugarcoat the challenges facing key domestic operations.
“Looking at our four main divisions, Institutional and New Zealand have performed consistently well, however Australia Retail and Business & Private Bank have underperformed,” Matos said. “Despite growth in both assets and deposits, intense competition and a falling interest rate environment impacted margins.”
The frank assessment signals trouble in ANZ’s consumer-facing operations as the bank battles for market share in a crowded Australian retail banking landscape. The comments come as falling interest rates squeeze the profit margins banks earn on lending, while fierce competition limits their ability to pass costs to customers.
$1.1 Billion in Charges Hit Bottom Line
The significant items totaling $1.1 billion that hammered ANZ’s headline profit included the ASIC settlement and restructuring charges announced Oct. 31. The charges reduced cash profit through a $285 million hit to income, $1.03 billion in increased expenses, partially offset by $207 million in reduced tax expense.
Excluding those one-time items, ANZ’s cash profit of $6.9 billion matched the prior year’s performance when adjusted for Suncorp Bank acquisition-related adjustments. The bank’s cash return on equity stood at 9.6% and cash return on tangible equity reached 10.5% when excluding the significant charges.
The reported cash profit of $5.79 billion including the charges translated to a cash return on equity of 8.1% and cash return on tangible equity of 8.8%, reflecting the impact of the regulatory and restructuring costs.
Capital Position Strengthens
ANZ maintained what it characterized as a strong capital position with a Common Equity Tier 1 ratio of 12.0%, up 25 basis points over the half-year period. Including a planned $1 billion capital return from its non-operating holding company to the bank, the proforma CET1 ratio stands at 12.26%.
The bank ceased the remaining $800 million of its on-market share buyback program, redirecting that capital alongside the $1 billion return to shore up its balance sheet as it pursues its ANZ 2030 strategy.
“Our strong capital position enables us to deliver on our immediate priorities to ensure we get the basics right, including a substantial improvement in productivity and initial investment for the bank’s growth,” Matos said.
The board’s decision to hold the final dividend steady at 83 cents per share signals confidence in the underlying business despite the headline profit decline. The bank applied a 1.5% discount to its Dividend Reinvestment Plan and Bonus Option Plan for the final dividend.
Credit Quality Holds Steady
Overall credit quality remained sound, with the total credit impairment charge for the full year reaching $441 million. That figure comprised $114 million in collectively assessed provisions and $327 million in individually assessed provisions.
The bank reported a modest increase in individual provisions over the half, driven primarily by lower write-backs and recoveries rather than a deterioration in loan quality. The collective provision balance after foreign exchange movements stood at $4.38 billion, with the collective provision coverage rate rising 5 basis points to 1.18% over the half.
The credit metrics suggest ANZ isn’t seeing significant stress in its loan book despite economic headwinds, though the bank remains cautious about maintaining adequate provisions against potential future losses.
ANZ 2030 Strategy Takes Center Stage
Matos repeatedly emphasized the bank’s ANZ 2030 strategy as the roadmap for addressing underperformance and capitalizing on growth opportunities, framing the current challenges as validation of the strategic direction.
“Second, we have a significant opportunity to improve our performance in Australia Retail and Business & Private Bank, while extending our leadership in Institutional and New Zealand,” Matos said, outlining what he called the second key takeaway from the results.
“Third, ANZ 2030 is the right strategy to capture these opportunities,” he added.
The CEO said the bank is “making progress on our immediate priorities at pace,” listing several key initiatives including embedding the leadership team and resetting culture, accelerating integration of Suncorp Bank, delivering the ANZ Plus single-customer front-end, simplifying operations and reducing duplication, and improving non-financial risk management.
Risk Management Overhaul Underway
Upgrading non-financial risk management emerged as a critical priority in Matos’ comments, with the CEO noting significant work already in motion to support business and cultural transformation.
“Uplifting our non-financial risk management is a key priority. A significant amount of work is already underway to support the business and cultural transformation which will deliver a better-run bank for our customers,” Matos said.
The bank disclosed that its Root Cause Remediation Plan submitted to the Australian Prudential Regulation Authority has received approval, marking progress in addressing regulatory concerns that likely contributed to the ASIC settlement costs reflected in the results.
ANZ introduced an updated reporting approach alongside the results, promising greater transparency around key performance indicators and a more detailed scorecard on an ongoing basis.
“We are committed to providing these details on an ongoing basis, as we demonstrate our commitment to our strategy and ambitions,” Matos said.
Focus on Fundamentals and Growth
Despite acknowledging significant challenges, Matos struck a confident tone about the bank’s competitive position and ability to execute its turnaround strategy.
“We have maintained a strong focus on the fundamentals of our balance sheet, capital, provisioning, and the composition of our business,” Matos said. “A final dividend of 83 cents per share reflects the underlying financial performance of the business and our confidence in our strategy.”
The CEO characterized the bank’s Asia presence as a key differentiator, describing the region as “the fastest growing economic region in the world” and a source of diversification benefits for the franchise.
Looking ahead, Matos promised improved performance as the strategy takes hold.
“The results we have announced today demonstrate our franchise is strong, but action is needed. We are absolutely committed to executing ANZ 2030 and are on the right path. As we deliver our strategy, we will accelerate growth and outperform the market, while delivering more for our customers,” Matos concluded.
The admission that “action is needed” alongside the promise to “accelerate growth and outperform the market” sets clear performance expectations for investors and customers as ANZ navigates intense competition in Australian retail banking while managing regulatory remediation and strategic transformation.
The 10% profit decline and frank acknowledgment of underperformance in key divisions mark a challenging period for one of Australia’s Big Four banks, even as management insists the underlying business remains fundamentally sound and well-positioned for future growth.
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