Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy after the big ASX bank deferred its interim dividend?
Whilst the ANZ share price initially dropped under $16.30 at the start of trading, it is now up 0.9% at the time of writing. Some investors seemed to like what they saw from the FY20 half-year result.
The ANZ dividend deferral
The important thing to remember is that the dividend was deferred rather than cancelled altogether.
ANZ's Board will look at all of the factors including the severity of the lockdowns before deciding a final position on the dividend. ANZ will provide an update as part of a trading update in August.
There was just too much uncertainty about what's going to happen over the next few months. Will some retiree investors decide to sell at whatever the ANZ share price is?
What were the actual profit numbers?
ANZ reported that its continuing cash earnings declined 60% to $1.41 billion. Statutory profit after tax declined 51% to $1.55 billion.
The result was driven by credit impairment charges of $1.67 billion that included increased credit reserves for COVID-19 impacts of $1.031 billion.
Over the longer-term, if earnings go lower then the ANZ share price will follow.
ANZ's profit wasn't helped by the declining net interest margin (NIM). The NIM for the second half of FY19 was 1.72% and for the first half of FY20 it was 1.69%. That doesn't seem like much of a change, but it's a large difference when you think about the many billions of dollars ANZ is dealing with. The lower official interest rate isn't helping bank profits.
Is the ANZ share price a buy?
It seems that ANZ isn't going to be doing a capital raising, for now at least. I think that's the right call. It's better to defer the dividend than dilute existing shareholders.
The ANZ share price isn't too far off its GFC-low price, but I'm not sure it's going to drop that low. The next six months are going to be painful for ANZ and all banks. The current share price doesn't interest me considering how much hardship there could be.
There are plenty of quality ASX shares trading at lower prices which don't have such a large wipeout risk.
