In its first quarter trading update ANZ released quite modest results. As low interest and…
ANZ Banking Group’s Chief Executive Officer, Shayne Elliot, provided markets with an unaudited third quarter 2016 financial year (3Q16) update.
The key take-outs were:
Group – Statutory net profit after tax was $4.3 billion with the cash profit down 3% to $5.2 billion. Group Net Interest Margin (NIM) was described as being stable.
Institutional – The continued rebalancing and restructuring of this business has resulted in a $15 billion decrease in the Credit Risk Weighted Assets (CRWA) occurring in 3Q16. Although divisional revenue decreased less than the reduction in the CRWA. It resulted in a positive impact on NIM by ~5 basis points.
Provisions – The 3Q16 total provision charge was $1.4 billion comprising of individual provisions of $1.34 billion and collective provisions of $60 million (up on 1H16 by 52.5%, 50.2% and 7.1% respectively). The bottom of the credit cycle has clearly passed with ANZ’s total provision charge, gross impaired assets and 90+ day home loan delinquencies (inclusive of hardship change) all trending up over FY16.
Capital – As at 30 June 2016 ANZ’s Core Tier 1 (CET1) ratio was 9.7%, Tier 1 ratio 11.8% and the Total Capital Ratio 14.4%. This was well above APRA’s regulatory minimum requirement of 8%. ANZ also commented on APRA’s revised mortgage RWA target on 8 August, providing additional insights as to how the CET1 capital ratio could be impacted:
Source: ANZ ASX company announcement 8 August 2016.
ANZ said that a 1% increase (or decrease) from the mid-point (27.5%) would have an impact on the pro forma CET1 ratio of approximately 6 basis points due to he capital raised in August/September 2015.
The Leverage Ratio remained flat over the quarter at 5.1%;
Continue to expect the FY16 result for the group to be broadly in line with expectations as 4th quarter seasonal factors have benefited ANZ historically.
This update is neutral from a credit point of view.