Suncorp Bank integration on track as ANZ tipped for $7bn profit

ANZ says it hasn’t come across any surprises since acquiring Suncorp’s banking unit for $4.9bn, despite disclosing a $196m charge impacting its second-half earnings result.

ANZ acquired Suncorp’s banking division in a $4.9bn acquisition this year. Picture: AFP

ANZ’s finance group general manager Richard Hayes says the bank hasn’t come across any surprises after acquiring Suncorp’s banking unit in a $4.9bn transaction, despite disclosing a $196m charge impacting its second-half earnings result.

The accounting-related adjustments come after ANZ completed the purchase of Suncorp’s bank on July 31, and had to apply new International Financial Reporting Standards that came into force in 2017, as it bedded down the acquisition.

In an ASX statement on Monday, the bank said the accounting adjustments would not impact the “assessed value” of the Suncorp Bank transaction or the purchase price.

Mr Hayes noted, however, that in bringing across Suncorp’s loan book and applying ANZ’s credit provisioning and assessment methodologies there had been a “slight increase” in overall provisioning for potential loan losses.

“There was nothing that we were surprised by,” Mr Hayes told analysts, declining to give further detail, given ANZ reports full-year earnings next week.

ANZ’s statement said second-half statutory and cash profit would be impacted by an estimated after-tax charge of $196m, reflecting “one-off acquisition accounting related adjustments”. The bank also noted a net two basis point reduction to ANZ’s level 2 common equity tier one ratio.

The statements showed the charge had two components, the largest being a collectively assessed credit impairment charge of $244m, or $171m after tax, and an accelerated software amortisation charge of $25m after tax.

ANZ reports its full-year earnings on November 8 with analysts expecting a $6.9bn profit for the 12 months ended September 30, according to Bloomberg.

Monday’s statement noted that Suncorp Bank would be presented as a separate division within the results.

“Given the second-half result includes only two months of Suncorp Bank’s earnings, the discussion materials for some group disclosures will be adjusted to reflect underlying trends excluding the Suncorp Bank division,” ANZ said.

Jarden analysts led by Jeff Cai expect ANZ to report an annual profit of $7.03bn, against the backdrop of increasing costs and bad and doubtful debts.

“Results composition is likely distorted by markets income allocation and consolidation of two months of Suncorp Bank earnings,” they said.

Mr Cai said he would monitor ANZ’s results to assess how the bank is dealing with “negative leverage” to lower US cash rates, any update on the Suncorp Bank integration and how ANZ may position to “maximise retail bank margins”.

Macquarie Group kicks off the banking profit reporting season on Friday.