ANZ chucks out cash

Advertisement
images

From Credit Suisse:

Event: ANZ reported (company defined) cash earnings of $3,515mn (up 11% on $3,179mn pcp) which was 1% better than our $3,495mn estimate and 2% better than the $3,437mn Bloomberg consensus average. Interim DPS of $0.83 (up 14% on the $0.73 pcp) was $0.03 better than our consensus estimate. Refer detailed financials attached. Compositionally a solid result, with 4% sequential revenue growth (broadly based, but driven particularly by Global Markets, 5% loan growth) and 6% underlying profit growth; bad debts declined (0.21% vs. 0.25% sequentially) but did not drive the earnings surprise. Divisionally, sequential cash earnings growth was driven by International & Institutional (10%) and New Zealand (13%).

  • Investment Case: Good result for a stock with an undemanding PE compared to peers – headline earnings and DPS beat (although DPS in part reflects a re-balancing between interim and final dividends). What we liked about the result: 1) Strong lending balance growth (5%) with equity Tier 1 well in tact at 8.33% (8.48% sequentially); 2) Improving cost to income ratio (44.3% vs. 45.3% sequentially) reinforced by flat 1H14 headcount; 3) Improving impaireds ratio (0.70% vs. 0.87% sequentially) with declining flows of new impaireds. What we didn’t like: 1) Softer collective provision coverage (0.79% vs. 0.85% sequentially).
  • Valuation: ANZ currently trades on 13.0x 12-month prospective earnings (6% discount to the major bank peer group vs. a 6% four-year average discount) and a corresponding book multiple of 2.0x.
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.