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ANZ follows peers down path of lower earnings but higher payout
Australia’s fourth largest mortgage lender, ANZ Group (ASX:ANZ), followed in the footsteps of two of its biggest competitors, Westpac (ASX:WBC) and National Australia Bank (ASX:NAB), by increasing the dividend in the facing of a falling profit for the 12 months to September 30, 2024.
ANZ’s after-tax profit was $6,535 million, down eight per cent compared with the previous year, while the full-year dividend was up four cents to $1.66 (the final dividend of 83 cents was partly franked at 70 per cent).
The lower earnings number reflected fierce competition in the mortgage market that cut into the bank’s margins, while late payments increased (repayments more than 90 days late are at their highest level since 2020), with customers feeling the pinch from higher interest rates and cost-of-living expenses.
But these negatives, which have exacted a toll across the banking sector as banks either sacrifice market share or margins in a highly competitive mortgage space, haven’t deterred investors, with the share price up 33 per cent for the past 12 months, closing at $32.34 on Tuesday.
For shareholders, many of whom are SMSFs, the dividend announcement is a clear indication of the bank’s stable footing and commitment to deliver value.
CEO Shayne Elliott (pictured) told shareholders: “This strong performance again demonstrates the benefits of our simplification agenda combined with targeted investments in our core banking businesses.
“Despite challenging conditions, we’ve reported one of our strongest revenue performances ever, with the dividend announcement being a direct reflection of this achievement.”
ANZ’s recent acquisition of Suncorp Bank has played a pivotal role in supporting the bank’s dividend payouts. Since finalising the acquisition, it has made positive contributions to ANZ’s earnings, expanding its customer base and bringing additional growth in home loans and deposits.
This strategic acquisition aligns with ANZ’s ongoing commitment to sustainable growth and solidifying its market position, giving shareholders increased confidence in the bank’s long-term performance.
“Suncorp Bank’s solid customer acquisition, as well as growth in home loans and deposits, have been particular highlights,” Elliott said. “This acquisition not only strengthens ANZ’s earnings capacity but also supports its dividend strategy by broadening revenue streams and enabling faster-than-expected synergy realisation.”
ANZ’s growth strategy includes the rollout of its ANZ Plus digital platform. Designed to modernise retail banking, ANZ Plus has expanded significantly, now representing a substantial portion of the bank’s customer deposits.
By investing in technology-driven growth, ANZ aims to support sustainable profits and maintain a stable dividend payout for shareholders in the long term.
Elliott said ANZ Plus, which had a milestone year growing its customer base 84 per cent, now accounted for nearly one in five of active retail customers in Australia. Through the year deposits have grown 70 per cent to almost $16 billion.
“New features added during the year, including an industry-first feature giving customers a consolidated view of all their bank accounts, will make it easier and safer to transition our existing customers to ANZ Plus, starting in 2025.
“As industry-wide challenges remain in retail banking, this year again highlighted the benefits of our diverse portfolio with institutional achieving record revenue, a record profit before provisions and a record return on equity.”
He recognised that some customers were doing it tough in the current economic environment. “Higher interest rates are impacting on customers, and we saw an increase in those requiring hardship support. While our data shows customers, in general, are holding up better than expected, we know that’s not the case for everyone.”
