ANZ full-year earnings snapshot

Nicholas Grove  |  25/10/2012Text size  Decrease  Increase  |  

Nicholas Grove: ANZ has announced its results for the 2012 financial year and here to give investors his initial impressions of the bank's earnings, I'm joined by Morningstar's David Ellis. David, thanks very much for joining us.

David Ellis: Pleasure Nick.

Grove: First of all, David, were ANZ's earnings and dividend above, in line with, or below what you were expecting?

Ellis: $5.66 billion, that's a touch higher than what we were expecting but pretty much in line. The surprise was the dividend, which was a solid increase. They are 4 per cent higher but we were looking for about 5 per cent higher. So, the final dividend was just a touch under what we were expecting.

Grove: David, what were the key drivers of this result?

Ellis: Good top-line revenue growth made up of interest income, about 4 per cent, 5 per cent growth in interest income, 3 per cent growth in non-interest income, so it was good to see some top-line revenue growth, particularly in the economic conditions that we're in with relatively modest credit growth. Cost control was good, particularly in the second half. Second-half costs were flat on first half, and so the equation of pretty solid revenue growth with lower cost growth means good upside, uplift in underlying earnings.

Grove: Finally David, was there anything about the result that surprised you or that will alter your outlook for the bank?

Ellis: The dividends were a little bit lower than we were expecting and also there was guidance from ANZ that they're going to maintain their payout ratio at round about 65 per cent. We were forecasting a little bit higher than that, so we've had to pull back our forecast a bit to account for that. Credit growth, also credit quality, loan quality, ANZ guided for some weakness there and with expectations of higher bad debt - not much higher but a little bit higher bad debts in the next few reporting periods. So, we've increased our bad debt provisions, we've pulled back our dividend forecast a touch, but importantly, we still maintain that ANZ and all four major banks are going to continue to grow dividends and maybe in 2013 or 2014 we might see some capital management initiatives, which could be special dividends or share buybacks for the major banks.

Grove: David, thanks very much for your time.

Ellis: Pleasure Nick.

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