The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is rising after the big four bank announced a substantial rise in the FY21 first quarter profit.
ANZ told investors that it achieved strong performance in volatile trading conditions which highlighted its disciplined execution of its strategy as well as maintaining a simpler and well balanced portfolio of businesses.
First quarter profit numbers
The major ASX bank reported that it generated statutory profit after tax of $1.62 billion. ANZ also made cash profit from continuing operations of $1.81 billion, up 54% compared to the quarterly average from the second half of FY20.
ANZ reported that its underlying net interest margin (NIM) improved by 3 basis points compared to the second half of FY20 to 1.60%. The NIM was helped by the mix of assets and deposits, deposit and asset pricing, and wholesale funding.
The combination of higher volume growth and higher margins drove revenue up 4% for the quarter when excluding the impact of the markets business.
ANZ said that its common equity tier 1 (CET1) capital ratio improved from 11.3% at 30 September 2020 to 11.7% at 31 December 2020.
Loan book
ANZ said that its credit quality was improving. The total provision result for the three months to 31 December 2020 showed a net release of $150 million. This comprised an individually assessed provision charge of $23 million and a collective provision release of $173 million. The collective provision release is equivalent to around 10% of the $1.7 billion set aside during FY20.
ANZ said that the collective provision release was prudent when balancing the improvement in the economic outlook at the end of the December quarter with the level of ongoing uncertainty.
At 31 December 2020, the credit provision balance of $4.8 billion had additional reserves of $1.4 billion compared to the pre-COVID-19 levels at 30 September 2019.
ANZ said that approximately 1% of home loan customers in Australia and New Zealand have been transferred to hardship. In Australia, 84% of deferred home loans have rolled off with 98% returning to repayment.
The bank said that the number of active housing account deferrals is 15,000, representing $6 billion of loans. The number of business accounts still in deferral is 2,500 representing $1 billion of loans.
Management's thoughts on the outlook
ANZ CEO Shayne Elliot was quoted, saying:
ANZ is well positioned heading into the remainder of 2021 with good momentum in our core activities. The done to simplify and de-risk the business over the past five years set us up well and we have the capital, liquidity and operational capacity to continue to support our customers and the broader economy through what remains a volatile period.
Initial reaction for the ANZ share price
The market's reaction has been positive to the result, with the ANZ share price currently up more than 2%.
Analysts have also been having their say. The Australian Financial Review quoted Evans and Partners analyst Matthew Wilson:
ANZ trades at a 7 per cent price-to-book discount to Westpac, yet it is in far superior shape with external focus and much less required self-help.
