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MarketScreener Homepage  >  Equities  >  AUSTRALIAN SECURITIES EXCHANGE LIMITED  >  Australia and New Zealand Banking Group Limited    ANZ   AU000000ANZ3

AUSTRALIA AND NEW ZEALAND BANKING GROUP

(ANZ)
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ANZ Half-Year Profit Slides -- Update

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04/30/2019 | 04:51pm EST

By Robb M. Stewart

MELBOURNE, Australia--Australia & New Zealand Banking Group Ltd. (ANZ.AU) cautioned retail banking in Australia faces subdued credit growth, intense competition and increased compliance costs for the foreseeable future, and a tougher environment was starting to be seen in neighboring New Zealand.

Still, while home-loan demand in Australia has slowed sharply over the past year, the Australian bank on Wednesday said it benefited from falling bad debts and tight control of expenses over the first half of its financial year, and other parts of ANZ's business including institutional banking were performing well.

The bank reported a 4.5% drop in its first-half net profit to 3.17 billion Australian dollars (US$2.24 billion) in the six months through March from A$3.23 billion a year earlier, as operating income dropped by 9.2% to A$9.29 billion from A$10.24 billion.

However, cash earnings--a measure followed by analysts that strips out what the bank considers non-core items such as economic hedges and the revaluation of policy liabilities--rose about 2% to A$3.56 billion. That result excludes exited operations.

ANZ said it again plans to pay a dividend of A$0.80 a share, having kept its half-yearly dividend steady for three years since moving to a more conservative payout ratio.

ANZ, one of the region's largest lenders, has in recent years been tightening its focus on its core banking operations in Australia and New Zealand, selling stakes in operations in Asia and pulling out of wealth-management businesses at home.

Chief Executive Shayne Elliott said the actions taken over the past three years to improve the bank's lending book, combined with a relatively benign credit environment, have helped ANZ to maintain solid credit quality over the half year. Also, ANZ has absorbed about A$550 million in cost inflation and reduced the running cost of the bank by about A$300 million since the end of 2015, even excluding assets sales, Mr. Elliott said.

In April, ANZ completed a A$3 billion share buyback program, helping it to lift capital buffers ahead of Australian regulatory settings. It aims soon to finalize the A$2.85 billion sale of its Australian life insurance business to Zurich Insurance Group, and is working to complete a A$975 million deal struck last year to sell its pensions and financial planning businesses to Australia's IOOF Holdings.

Credit impairment charges over the six months declined by about 4% year-over-year, due largely to lower individually assessed credit impairments. But ANZ's closely watched net interest margin, a measure of the difference between interest income generated and the amount of interest paid, contracted by 0.13 percentage point on year to 1.8%, which the bank said reflected higher funding costs, price competition and growth in lower-margin markets balance-sheet trading.

Mr. Elliott said retail banking in Australia was set to remain under pressure, while New Zealand was beginning to share similar characteristics with strong competition and a slowing housing market in Auckland.

Chief Financial Officer Michelle Jablko added that while loan losses were low, there were pockets of stress in Australia's mortgage market and some increases in customers falling behind on home-loan payments. "It's small in context and we're coming from a very low base. But there are some pockets that we're watching," she said.

Write to Robb M. Stewart at robb.stewart@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 0.68% 26.56 End-of-day quote.7.31%
IOOF HOLDINGS LTD -1.40% 7.05 End-of-day quote.-9.16%
ZURICH INSURANCE GROUP 1.00% 433.1 Delayed Quote.7.98%
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Financials (AUD)
Sales 2020 18 602 M
EBIT 2020 9 637 M
Net income 2020 6 083 M
Debt 2020 -
Yield 2020 5,95%
P/E ratio 2020 12,5x
P/E ratio 2021 12,1x
Capi. / Sales2020 4,06x
Capi. / Sales2021 4,00x
Capitalization 75 471 M
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Mean consensus HOLD
Number of Analysts 15
Average target price 26,73  AUD
Last Close Price 26,61  AUD
Spread / Highest target 10,9%
Spread / Average Target 0,45%
Spread / Lowest Target -11,3%
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Managers
NameTitle
Shayne Cary Elliott Chief Executive Officer & Executive Director
David M. Gonski Chairman
Michelle Jablko Chief Financial Officer
Gerard Florian Group Executive-Technology
Paula Jane Dwyer Independent Non-Executive Director