The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price went up almost 3% today after releasing its first quarter update for FY21.
As a result of the increase in the share price today, ANZ shares are essentially back to where they were just before the COVID-19 crash happened. It’s higher than it was in January 2021. Could this mean a big dividend is coming?
What happened in the first quarter?
ANZ said that its cash profit from continuing operations of $1.81 billion was up 54% on the average of the last two quarters of FY20. Excluding large and notable items, cash profit went up by 29%.
One of the most interesting bits of the update was that the total provision result in the December quarter was a net release of $150 million. This was a combination of an individually assessed provision charge of $23 million and a collective provision (CP) release of $173 million. The CP release is equivalent to around 10% of the $1.7 billion set aside during FY20. ANZ said the CP release was prudent when balancing the improvement in the economic outlook at the end of the December quarter with the level of ongoing uncertainty.
ANZ said that the recent lockdowns in Perth, Brisbane, Melbourne and Auckland demonstrate how quickly things can change. The bank believes its current settings are both prudent and appropriate, given the uncertainty.
The amount of loans deferrals have reduced significantly, but there is still a sizeable number of 15,000 home loans being deferred. In dollar terms, that’s around $6 billion.
Could a big dividend be on the cards from ANZ?
It seems likely that the interim FY21 dividend will be much larger than the FY20 interim dividend.
ANZ’s balance sheet remains strongly positioned with an APRA common equity tier 1 (CET1) capital ratio of 11.7%, which was up around 40 basis points (0.40%) compared to the 11.3% ratio at September 2020. ANZ is unlikely to need to hold onto that much capital now that the worst is over.
Looking at the numbers on Commsec, ANZ is expected to pay an annual dividend of around $0.98 per share in FY21, up 62.5% compared to FY20.
Before you consider ANZ for dividends, you can click on this link to ASX dividend shares and find lots of ASX stock ideas and analysis.
