The ANZ Group Holdings Ltd (ASX: ANZ) share price is under the spotlight today after reporting its FY24 first-half result.
ANZ FY24 first-half result
The ASX bank share reported a mixed report for the six months to 31 March 2024:
- Profit before credit impairments and tax fell 2% to $5.1 billion
- Cash profit declined 1% to $3.55 billion
- Statutory net profit after tax (NPAT) fell 4%
- Dividend per share of $0.83 per share, up 2.5%
- Share buyback of $2 billion announced
- Common equity tier 1 (CET1) ratio increased to 13.5%
Part of the motivation for the $2 billion share buyback was completing the partial sale of its stake in Malaysia’s AmBank, releasing $668 million in capital.
Looking at the divisional performance, ‘Australian retail’ cash profit declined 9% to $794 million, ‘Australian commercial’ profit declined 5% to $665 million, ‘institutional’ profit rose 12% to $1.5 billion and ‘New Zealand’ profit increased 2% to NZ$852 million.
The Australian retail division saw home loan growth that grew faster than the overall loan systems, with pricing above the cost of capital. In other words, ANZ managed to grow its market share and those new loans were profitable. Customer deposits were up 5%.
ANZ’s underlying net interest margin (NIM) showed an ongoing decline. This is the profit measure that shows how much a bank is making on its lending, which includes the cost of paying for funding of the loans (such as savings accounts). The underlying NIM was 2.32% in the FY24 second quarter, 2.33% in FY24 Q1, 2.34% in FY23 Q4, 2.36% in FY23 Q3 and 2.39% in FY23 Q2. Ongoing weakening of the NIM could be bad news for the ANZ share price.
Acquisition
ANZ continues to make progress on buying the banking operations of Suncorp Group Ltd (ASX: SUN) to accelerate its growth and improve its geographic balance. In February 2024, the Australian Competition Tribunal authorised the proposed acquisition.
Completion remains subject to approval from the Federal Treasurer and the amendment of the Metway Merger Act. Preparations to integrate Suncorp Bank are “well-advanced”.
Outlook for the ANZ share price
The ANZ CEO Shayne Elliot said:
Both the domestic and international environments are expected to remain challenging across the remainder of the year. The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally.
Despite these conditions, we are well positioned with the diversity of our businesses, prudent management, and the strength of our customers holding us in good stead. In fact, our work to build a well-managed, de-risked and diversified bank, coupled with our unique international presence, means we are well placed to succeed in this environment.
ANZ seems to be doing quite well in the current environment. Being able to profitably grow market share is an achievement with all of the competition. The higher dividend and large share buyback is pleasing, though falling profit is not exactly a good thing. With arrears continuing to rise with Australian home loans, I’d be wary of how high that’s going to go.
With the ANZ share price rallying over the last few months, I don’t think it is an appealing buy today. There are other ASX dividend shares I’d rather choose with more profit growth potential.
