ANZ full-year cash profit plunges 42% to $3.76bn

ANZ has reported its full-year cash profit has plunged 42 per cent to $3.76 billion, cutting its dividend by more than half.

ANZ had already warned its profit wold take a hit. Picture: Hollie Adams

A three-fold increase in credit charges has slashed ANZ Bank’s cash profit by 42 per cent and net profit by 40 per cent, leading to sharply lower final dividend.

The payout to shareholders slumped from 80c to 35c, making for an annual dividend of 60c, down from $1.60.

This translated to a payout ratio of 49 per cent - within the prudential regulator’s guidance of 50 per cent.

Unveiling statutory profit of $3.58bn compared to $5.95bn a year ago, chief executive Shayne Elliott said COVID-19 and the events of the last 12 months made it difficult to predict the course of 2021.

“What I do know, however, is we are in excellent shape to navigate whatever challenges emerge,” Mr Elliott said.

“ANZ has an experienced and stable management team, a strong balance sheet and prudent credit reserves to ensure we are able to support our customers, while still protecting the long-term interests of shareholders.

“While we are not managing the business expecting things to return to the way they were before the pandemic, nor are we sitting idle waiting for the next event to happen to us.

“ANZ is well-placed to respond to the opportunities that are emerging as a result of accelerated structural shifts in the economy.”

The 42 per cent slide in cash profit from $6.47bn to $3.76bn was driven by a spike in loan losses from $795m to $2.74bn.

This reflected the impact of COVID-19 and an $815m first-half impairment of the bank’s Asian associates.

ANZ’s return on equity fell from 10.9 per cent to a skinny 6.2 per cent.

The report came after ANZ warned earlier this week that second-half 2020 cash profit would be dented by an after-tax charge of $528m due to large notable items, including costs to compensate and repay customers and accelerated software amortisation.

The bank warned statutory profit would also see a hit by a similar amount as cash earnings and noted the charge would have about a five-basis-point impact on common equity tier one capital.

ANZ’s update follows Westpac outlining new provisions and charges on Monday, while National Australia Bank aired its profit hit last week.

Both Westpac and NAB report earnings for the 12 months ended September 30 next week.

The profit plunge as The Australian revealed that ANZ is to adopt the most ­ambitious net zero emissions ­action of the big four banks, making climate change a lending condition.

Earlier this week UBS analyst Jonathan Mott tipped ANZ would report a cash profit of $4.16bn.

Commenting on Victoria’s emergence from lockdown this week, Mr Elliott said the experience of other states was quite a sharp economic recovery.

In WA, for example, Mr Elliott said spending at cafes and restaurants was now 18 per cent higher than it was a year ago, before COVID-19.

“So there will be a bounce back,” he said. “We’re very, very confident it will happen in Victoria.

“Our job is to actually enable that. Businesses have to stock up, get their inventory, get their staff back.

“There’ll be a lot of need for working capital and all sorts of other things, and that’s exactly what we do. So there is a sense of optimism and it’ll be great … to have Victoria back on its feet and growing again.”

While there had been a $2bn increase in impairment charges, chief risk officer Kevin Corbally clarified that ANZ had yet to actually lose any money because of COVID-19.

Individual provisions, he said, were broadly the same; it was the collective provision, or expected credit losses for the future, which had increased.