ANZ profit dives on $1.7 billion impairment charge
30 April 2020, Written by David Simmons
COVID-19 has taken its toll on ANZ's (ASX: ANZ) half year profit, with the bank announcing a $1.7 billion impairment charge today.
The impairment includes $1.03 billion attributed to increased credit reserves for COVID-19 impacts, while the valuation of investments in Asian associates was impaired by $815 million, largely due to the impact COVID-19 is having in those markets.
Overall ANZ's profit was down 51 per cent year-on-year to $1.55 billion.
The bank remains in a strong position despite the impact of COVID-19 with a strong cash buffer; ANZ's Common Equity Tier 1 (CET1) capital ratio is 10.8 per cent at 31 March 2020, down 73 basis points.
Because of the impact of COVID-19 the bank's board has decided to defer its decision on the 2020 interim dividend until there is greater clarity regarding the economic impact of the coronavirus.
"This is a terrible time for many and I want our customers, employees and shareholders to know we enter this crisis in very good shape to support our communities given the work completed over the past four years to simplify our business and strengthen our balance sheet," says ANZ CEO Shayne Elliot.
"Our experienced management team has implemented a four-pronged plan focused on protecting the things that matter, adapting for a new world, engaging with key stakeholders, while still preparing for the future.
"From a customer support perspective, we are already assisting 180,000 customers with deferrals on loan payments. We also provided $16 billion in additional lending, mainly to our long-term investment-grade institutional customers to support them through COVID-19. This unparalleled level of customer support is ultimately in the long-term interests of all stakeholders, including investors."
Cash profit for ANZ's continuing operations was $1.41 billion, down 60 per cent from the prior corresponding period, and return on equity decreased to 4.7 per cent.
ANZ chairman David Gonski says the bank looked to guidance from the Australian Prudential Regulation Authority (APRA) that all ADIs and insurers should consider deferring decisions until the path through COVID-19 becomes clearer.
"This decision is not about our current financial position and ANZ has not received any concerns from APRA regarding our level of capital," says Gonski.
"The Board agrees with the regulator's guidance that deferring a decision on the 2020 interim dividend is prudent given the present economic uncertainty and that making a decision at this time would not have been appropriate."
"This was a very difficult decision and the Board considered all options available as we understand the impacts this will have on those shareholders who rely on dividends."
ANZ has also revealed the extent of its COVID-19 assistance to businesses today.
To date, the bank has received approximately105,000 requests for assistance on $36 billion worth of home loans in Australia, representing 14 per cent of the bank's home loan portfolio.
Repayment deferrals have been provided on $7.5 billion of lending to Australian customers, with assistance provided to approximately 15 per cent of commercial lending customers.
Further, it has pre-approved more than $4 billion in lending to 35,000 small business customers with existing transactional accounts and provided temporary overdraft increases for approximately 5,500 commercial accounts.
"While dealing with the immediacy of the current crisis as well as protecting our customers and staff remains our top priority, we are not sitting idle waiting for changes to happen to us," says CEO Elliot.
"We are analysing customer behaviour and fast tracking digital investments given we know there will be opportunities for banks that focus on their customers, stay prudent, read changing customer needs and have the resources to invest for the long-term."
Business News Australia
Author: David Simmons