A snippet from Mac Bank on the ANZ result below:
Subject: ANZ Bank (ANZ AU) (Outperform) – Using the levers to stay on track
Stock: ANZ AU Name: ANZ Bank Price: A$30.36 (at 6:10, 15 Aug 13 GMT) Market Cap (m): A$83,295 Current valuation (DDM/PE): A$33.52 12mth price target: A$35.50 Recommendation: Outperform Volatility index: Low Event
- Quarterly cash profit in at A$4.8bn, consistent with our expectations. Overall revenue softness, particularly around the margin, was somewhat expected although the quantum of 2H13 appears to be a little higher than we were expecting. Remember, though, you’re not paying top dollar for ANZ at the moment, with the stock trading at a 22% PE discount to the top rated peer. Outperform
Impact
- Cash profits of $4.8bn came in-line with expectations – margins set to decline 5bp HOH – ANZ delivered a A$4.8bn cash profit for the quarter, in line with MRE expectations of A$4.8bn. While revenue was up 5% on pcp, margins continue to look a little soft with margins declining 2bp across the quarter and expectations for a further decline in 2H13, leaving the group margin down 5bp HOH on our calculations. As a result ANZ have guided to softer revenue growth than last year (4.6%) with a strong performance on productivity leading to positive JAWS.
- Asset quality good (24bps from 27bps 1H13) – Impairment expenses
were A$277m, coming in below our expectations of A$312m, with Management citing “Given the current credit quality trends, the Group now expects the Full Year 2013 charge to be slightly lower than 2012” being A$1.25bn. Impairment expenses were not affected by changes in overlays with declining impaired and new impaired assets. - Cost growth outcome excellent (-0.5% PCP) – The benefits of the 2012 productivity program is starting to pay dividends with expense growth coming in at -0.5%. What was encouraging is the outlook for FY13 result with Management “on track to deliver strongly positive JAWS for the year”.
- Capital generation good – CTE1 capital fell 21bps to 7.97% driven by the payment of the 2013 dividend (~60bps) partially offset by earnings during the period of ~50bps.
- Currency impact positive – They have included a chart showing that for a 5 cent drop in the AUS vs. USD, NPAT improves 1.5% (excluding hedges).
Divisional
- Australian division – Another solid result in the Australia division with margins steady and credit quality under control. The division saw solid balance sheet momentum in commercial lending, retail mortgages and deposits. Productivity remains a focus although increased investment will see costs increase HoH, although lower on a YoY basis.
- International & Institutional Banking (IIB) – The focus will likely be on the IIB group’s margin (ex Global Markets) which is expected to compress ~20bps in the second half from 2.77% in 1H13. Global markets grew 13% to $1.6 bn ($523m for 3Q13). The APEA segment continued to deliver strong revenue growth, and there was good underlying volume in priority products linked to their super regional strategy with client revenues up 5% on the first half quarterly average while expenses remain tightly managed.
Action and recommendation
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We currently have an Outperform recommendation
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