ANZ strong 1H13 results – dividend payout ratio to increase

ANZ reports strong 1H13 results – dividend payout ratio to increase

ANZ reported first-half 2013 results exceeding our expectations with impressive performances from both domestic and international businesses. Cash NPAT increased an impressive 10% to AUD 3.2 billion from $2.9 billion in 1H12, and more importantly the fully franked interim dividend increased 11% to 73cps – equating to a 64% payout. The key takeout is the intention to progressively increase the dividend payout from the current level at the bottom of the 65-70% range to the top end. Strong profitability, improving return on equity (ROE) and surplus capital supports the higher payout.

The earnings performance confirms our long held argument the major banks can deliver reasonable profit and dividend growth despite only moderate loan growth. Another highlight is the strong increase in ROE from 14.7% in 1H12 to 15.5%. Our positive view is intact and importantly key metrics strengthen our investment case. Solid revenue growth (up 4% on pcp), tight cost control (expenses down 2% on pcp) and stable bad debts combine to deliver the 10% increase in cash profit. Net interest margins softened 3bps to 2.25% but the major highlight is the significant improvement in operational efficiency with the cost to income ratio improving from 47% to 44%. Balance sheet measures improved with capital, funding and liquidity all stronger. Lending was fully funded by deposits with deposits growing 5% and net loans up 3%. Core profits (earnings before in bad debts and tax) increased an impressive 10% to $5.1bn.

ENDS

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