Australia’s fourth-largest bank, Australia and New Zealand Banking Group Ltd [ASX:ANZ], is trading lower today on the back of a plunge in profits.
On Tuesday, ANZ warned investors its second half would be impacted by an after-tax charge of approximately $523 million.
News that pushed the ANZ share price down 1.74%.
Investors have been handed more bad news this morning, with dividends on the chopping block as the pillars of Australia’s financial sector come under increasing pressure from the current pandemic.
At the time of writing the ANZ share price is down 3.24%, or 62 cents, to trade at $18.54 per share.
Banks still weathering COVID fallout
In its full-year results ANZ said cash profits had plunged 42% to $3.76 billion for the year to 30 September.
According to the bank, the main culprit for their profit woes are the ramped-up provisions against loans that could turn sour as borrowers struggle to recover from COVID-19 impacts.
ANZ proposed a final dividend of 35 cents per share, fully franked with no discount for its dividend reinvestment program.
Combined with its interim dividend of 25 cents in May, the total dividend of 60 cents is exactly a dollar smaller than in FY2019.
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A disappointing payout for many, but ANZ said the outcome was ‘pleasant’ given the current operating environment.
Just how bad is it?
Bad, but things are improving.
ANZ still has 61,000 deferred home loans across Australia and New Zealand, though this figure is down from 108,000 as of 31 July.
They also have another 10,000 frozen business loans down from a peak of 23,000.
Despite the apparent improving conditions, ANZ’s credit impairment charge is up $2 billion on last year’s, coming in at $2.74 billion before tax.
Will an open Australia affect the outlook?
With Victorians finally out of their strict lockdowns and Australia to gradually reopen, could things be looking up.
ANZ warned investors the ongoing pandemic had increased uncertainty in its financial statements.
‘The ramifications of COVID-19 continue to be uncertain and it remains difficult to predict the impact or duration of the pandemic.’
Indeed, results are mixed when trying to decide on ANZ’s outlook.
The bank’s net interest margin (a key profit indicator) shrank to 1.63% from 1.75% as low official interest rates squeezed the gap.
Return on equity sank too, from 10.9% last year to 6.2%.
However, ANZ said home loan growth to owner-occupiers was above the market average and deposits remained strong.
Deferred home loans also showed signs of improvement, with the majority returning to full payment.
All of this makes it very difficult to pick what direction ANZ’s earnings — and more importantly its dividends — will take. If you’re dissatisfied with your income stocks, then check out our top five ASX-listed dividend stocks with a great chance of maintaining big payouts during and after the crash. Click here to download your free report.
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