The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is in focus after the major ASX bank share reported its FY22 result.
This is for the year ending 30 September 2022, its financial year runs differently to many other ASX shares.
ANZ FY22 result
Here are some of the highlights from the report:
- Statutory net profit after tax (NPAT) went up 16% to $7.12 billion
- Cash profit (continuing operations) was up 5% to $6.5 billion
- Cash profit before credit impairment, tax, and ‘notables’ down 3% to $9.1 billion
- Annual dividend per share up 3% to $1.46
There were a number of interesting elements that the bank reported.
Not only was there a mix of performance between the profit growth figures above, but the cash profit before credit impairments and tax was up 7%.
It said that its total provision release (a good thing) was $232 million. The total provision relates to how much ANZ has provisioned for loan losses, which was reduced during FY22.
The big ASX bank share said that it had restored momentum in its Australian home loans division, with application approval times back in line with peers.
Net interest margin (NIM)
The NIM tells investors what lending margin a bank is making on its loans – the interest revenue compared to the price of funding (like term deposits). It’s an important driver for the ANZ share price.
In the first half of FY22, the ANZ NIM was 1.58%. In the second half it was 1.68%, with an exit margin in September 2022 of 1.8%. Most of this gain came from ‘business at call’ and ‘retail at call’. In other words, customer deposits were largely what caused the growth of the NIM in the second half.
The bank outlined that it’s expecting to earn around $1.5 billion in net interest income in FY23 thanks to higher interest rates, and around $3.2 billion in FY25.
In terms of the outlook for the NIM, ANZ said:
We expect the environment will continue to be supportive for margins in the first half, although any change from the exit margin is likely to be more modest.
Final thoughts on the ANZ share price and outlook
ANZ is looking to buy the banking operations of Suncorp Group Ltd (ASX: SUN), so we’ll have to wait and see how effectively that works out for ANZ. Excluding that deal, it had a 11.1% common equity tier 1 (CET1) ratio.
The dividend represented a dividend payout ratio within its target of 60% to 65%.
ANZ noted that on average “people are still doing well”, but cost of living pressures are “starting to have a meaningful impact and the next six months will be testing”. It pointed to first-time homeowners that haven’t had the chance to build equity, and those with “less stable” employment.
The bank is expecting to make more lending profit in the next few years, but how will higher interest rates affect borrowers? Hopefully not too much.
ANZ is seemingly doing better now, including on the lending speed side, but there are other ASX dividend shares I’d rather go for that have longer-term growth potential.
