The Australia and New Zealand Banking Group (ASX: ANZ) share price will be on watch this morning after the release of its half year update.
That update saw the banking giant announce the more than halving of its cash profit and the deferment of its interim dividend.
How did ANZ perform in the first half?
For the six months ended March 31, ANZ recorded a statutory profit after tax of $1.55 billion. This was down 51% on the prior corresponding period and driven primarily by credit impairment charges of $1.674 billion.
These charges include increased credit reserves for COVID-19 impacts of $1.031 billion. ANZ notes that the valuation of investments in Asian associates was impaired by $815 million, largely due to the impact COVID-19 is having in those markets.
Cash profit from its continuing operations was $1.41 billion, down 60% from the prior corresponding period. Cash earnings per share decreased in line with this to 50 cents.
Excluding one-offs, cash profit would have been down 26% during the first half. This follows double digit declines from all three of its segments – Retail & Commercial, Institutional, and NZ.
At the end of the period the bank was in a strong capital position, with its Common Equity Tier 1 (CET1) Capital Ratio at 10.8%.
Other metrics of note were a 40bps increase in total credit impairment charge as a percentage of average GLAs and a 15% lift in customer deposits to $566.5 billion.
Dividend deferment.
Due to COVID-19 the ANZ board has decided to defer its decision on the interim dividend until there is greater clarity regarding the economic impact of pandemic.
ANZ's chairman, David Gonski, explained: "This decision is not about our current financial position and ANZ has not received any concerns from APRA regarding our level of capital. The Board agrees with the regulator's guidance that deferring a decision on the 2020 interim dividend is prudent given the present economic uncertainty and that making a decision at this time would not have been appropriate."
"This was a very difficult decision and the Board considered all options available as we understand the impact this will have on those shareholders who rely on dividends," Mr Gonski added.
COVID-19 support update.
ANZ provided the market with an update on how its customers are responding to the support packages it launched in March.
The bank has received ~105,000 requests for assistance on $36 billion worth of home loans. This represents 14% of ANZ's home loan portfolio.
Repayment deferrals have also been provided on $7.5 billion of lending to commercial customers, with assistance provided to ~15% of commercial lending customers.
The bank has also been lending money out during this time. It pre-approved more than $4 billion in lending to 35,000 small business customers with existing transactional accounts. The customers are borrowing an average of $140,000 each. It has also provided temporary overdraft increases for ~5,500 commercial accounts.
Difficult months ahead.
In his closing remarks, ANZ's CEO, Shayne Elliott, appeared cautiously optimistic on the future.
He said: "The coming months will be difficult. The COVID-19 crisis has already evolved at such a pace it is difficult to predict how deep the economic crisis will be or how long the recovery will take."
"However, the swift action from Governments in Australia and New Zealand, as well as the healthy state of corporate balance sheets going into the crisis, has both countries well placed to not only manage the health aspects but also lessen the economic impact," he added.
He concluded: "While dealing with the immediacy of the current crisis as well as protecting our customers and staff remains our top priority, we are not sitting idle waiting for changes to happen to us. We are analysing customer behaviour and fast tracking digital investments given we know there will be opportunities for banks that focus on their customers, stay prudent, read changing customer needs and have the resources to invest for the long-term."
