ANZ Beats Earnings Expectations, But Shares Still Drop

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ANZ announced a cash profit of $6.5 billion for the 12 months to September 30, beating consensus expectations by 6.4 per cent—but shares are still dropping.

Chief executive Shayne Elliott said, “It was an outstanding result, with contributions from all four divisions of the company: retail, commercial, institutional and New Zealand.”

“The positive result is a sign that the ANZ’s strategy and focus on customer experience, cultural change, and simplifying the bank are bearing fruit,” Elliott said.

But despite the strong performance, ANZ shares fell 2.2 per cent in early trading following its announcement. Investors appear to be concerned about future regulatory measures or potential impacts from the ongoing Royal Commission inquiry into the banking sector.

ANZ also announced it would be cutting its dividend by 6 per cent, in line with recent moves by other central banks to preserve capital and maintain strong balance sheets. This has likely contributed to the drop in share price.

The bank managed to right-size its formerly struggling Australian home loans business, with application times back in line with industry peers and a fully automated digital home loan product rolling out next year. Its commercial profit was up 11 per cent, institutional revenue was up two per cent yearly, and ANZ’s profit from New Zealand was up seven per cent.

David Berthon-Jones, a co-chief investment officer with Aequitas Investment Partners, tweeted that it was a “strong result to open the big bank reporting season”.

ANZ’s strong result comes as the big banks face increasing scrutiny from regulators and politicians alike. The banking sector is under pressure, from misconduct allegations to calls for a royal commission. However, it seems that the more heat the big banks come under, the more profits they make.

In August this year, the Hayne royal commission into misconduct in the financial services industry made damning findings against the banks. The commission heard evidence of widespread wrongdoing, including fraud, falsifying documents and providing improper advice to customers. In response to the report, Prime Minister Scott Morrison called the banks to “lift their game”.

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