The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is going to be on watch today after revealing its HY21 result and a big dividend.
ANZ’s HY21 rebound
The big four ASX bank reported that continuing operations cash profit was up 28% to $2.99 billion compared to the second half of FY20. Statutory profit after tax jumped 45% to $2.94 billion compared to the second half of FY20.
A key driver of the above numbers included a net credit provision release/benefit of $491 million.
However, looking under the hood, there was a bit of a decline of underlying profit. Still comparing to the second half of FY20, continuing operations cash profit before credit impairments fell 10% to $3.94 billion. When excluding ‘notable items’ as well, that profit was down 4% to $4.87 billion.
There was lower revenues in its institutional business. This was largely expected because of the impact of falling interest rates as well as a normalisation of ‘Markets’ revenue after an exceptionally strong 2020.
How are operating conditions?
ANZ said that Australia retail and commercial had another good half, becoming the third largest home lender in the market. Deposits also performed well, with retail and small business customers behaving prudently by building solid savings and offset balances through the half.
While the pandemic hasn’t resulted in large credit losses to date, the bank still has almost $4.3 billion in reserve in conditions deteriorate.
New Zealand continued its recent strong performance with record lending growth combined with disciplined cost management. ANZ said that it’s a well-run business that is an important part of its overall portfolio and it’s well placed to manage increased regulatory capital demands.
The overall net interest margin (NIM) improved by 6 basis points (0.06%) half on half to 1.63%.
ANZ dividend and CET1 ratio
The major bank’s board decided to double the dividend from 35 cents to 70 cents per share.
Its balance sheet continued to strengthen. The common equity tier 1 (CET1) ratio increased by another 110 basis points to 12.4%.
Summary thoughts on the ANZ share price
ANZ’s dividend recovery is a welcome boost for shareholders. If you double that dividend, then ANZ has a fully franked yield of 4.85%. That’s a pretty big yield considering how much the ANZ share price has risen since the COVID-19 crash. The bank’s share price isn’t likely to keep going up much unless interest rates rises. It offers a bigger dividend than Westpac Banking Corp (ASX: WBC) does after the HY21 result, which is handy.
It’s an interesting idea for income, but I’ll probably always feel that there are other ASX dividend shares that can provide better total returns over the long term.
