Australia and New Zealand Banking Group (ASX: ANZ) has reported its profit for its 2018 financial year.

ANZ Bank is one of the largest banks in Australia, along with National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA).

3 Headlines From ANZ’s Report

1: The Royal Commission took a heavy toll on profit

Whilst statutory profit was virtually unchanged at $6.4 billion, it was the 16% fall in cash profit to $5.8 billion and 5% fall of ‘continuing basis’ cash profit to $6.5 billion where ANZ noted it felt the pain.

For example, ANZ said that it spent $55 million on legal costs in the 2018 financial year due to the Royal Commission.

The bank also said it has recognised charges of $377 million after tax in the second half of 2018 for refunds and remediation costs.

ANZ CEO Shayne Elliott commented on the efforts regarding the Royal Commission, “We are engaging constructively with the Royal Commission and taking action to fast-track changes. We will make the investments required to earn the trust and respect of our customers and the community.”

2: ANZ’s net interest margin (NIM) continues to fall

For analysts, the NIM is a key profitability statistic for banks because it shows the difference ANZ makes on the money it has borrowed compared to the interest rate at which it lends to Aussies and Kiwis. The lower the number the smaller the profit.

The NIM was 1.93% at the end of the first half of FY18 and 1.82% at the end of the second half. ANZ outlined that there were a variety of reasons for the decline including asset & funding mix, funding costs, customer remediation, market balance sheet activities and Asian retail exit.

3: The dividend was maintained

The final dividend declared is 80 cents per share, meaning the full-year dividend was $1.60 per share.

ANZ Bank reported that its APRA CET1 capital ratio at 30 September 2018 was 11.4%, or 16.8% on an internationally-comparable basis. Management said that this placed ANZ well above the APRA ‘unquestionably strong’ threshold, ahead of the 2020 deadline.

Outlook

Mr Elliott doesn’t expect conditions to change any time soon.

He said: “We expect the tough revenue growth environment in retail banking in Australia to continue for the foreseeable future, however we are well positioned to take advantage of growth opportunities in Institutional, Asia and New Zealand.”

The ANZ share price has fallen almost 15% over the past year according to Google Finance.

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