ANZ boss Shayne Elliott defends the bank’s dramatic 24 per cent profit slump

ANZ has cut its dividend for the first time since the global financial crisis after a dramatic first-half profit slump.

ANZ has cut dividends for the first time since the global financial crisis. Picture: Julian Smith

ANZ has cut its dividend for the first time since the global financial crisis after its first-half profit slumped by nearly a quarter.

Cash profit for the six months to March 31 dropped 24.3 per cent to $2.782 billion — its lowest since 2010 — largely due to a $717 million hit from writedowns and restructuring charges, which the bank deemed necessary in the face of a more challenging business environment.

ANZ cut its dividend by six cents to 80 cents for a payout ratio of 67 per cent, and reiterated its determination to pull the ratio back from the increased returns of recent years to between 60 and 65 per cent.

Chief executive Shayne Elliott, announcing his first set of results for the bank since taking over from Mike Smith in January, said the cost of restructuring would leave the bank well placed to return to profit growth.

“This result reflects a challenging period for banking and we have taken the opportunity to move decisively and adapt,” Mr Elliott said.

“For the immediate future, we are in a period of consolidation, simplification and transition.”

The $717 million hit included $441 million related to accounting changes designed to accelerate amortisation and a $260 million impairment on its investment in Malaysia’s AmBank.

“This is not about clearing the decks ... it is about recognising the world has changed,” Mr Elliott told analysts. “This is not slash, burn and repair: that is not what we’ve done today.”

UBS analysts said the results represented “the rebase we’ve been waiting for” in a sector facing significant headwinds.

“We believe ANZ is making the right decisions, addressing many of the market’s concerns,” UBS analyst John Mott said.

“However, as has been seen numerous times in bank restructurings since the crisis, these processes are never easy and invariably lead to additional earnings volatility.”

ANZ also reported a $918 million provision for bad and doubtful debts, blaming lower commodity prices that have weighed on the resources sector and related industries.

The provision was slightly higher than the roughly $900 million it had warned the market to expect when it revised its forecast in March.

“We probably have seen the worst of it with regards to the resources sector sell-off,” IG market analyst Angus Nicholson said.

“The worst of the resources crash is over but, with regards to their Asian assets, I don’t think that is totally sorted out just yet.”

Net profit dropped 21.9 per cent to $2.738 billion, the lowest since $1.93 billion in the first half of 2010, and cash return on equity slumped from 14.7 per cent to 9.7 per cent.

ANZ shares dropped as much as 4.0 per cent at the start of trade before rallying strongly.

They closed up $1.32, or 5.56 per cent, at $25.05.

ANZ’S FIRST-HALF SLUMP

* Cash profit down 24.3 per cent to $2.782 billion

* Net profit down 21.9 per cent to $2.738 billion

* Interim dividend down six cents to 80 cents, fully franked