ANZ Bank reports strong profit numbers

ANZ’s result is solid but for us it’s not as good as it could have been. There might be some disappointment even though many global peers will envy the numbers. 

Underlying profit of $2.97bn is slightly ahead of market expectations for $2.94bn and the dividend is in line at 66 cents per share. The numbers imply a slight lift in profit in the second quarter compared to the first quarter, by a factor of around $100m. 

We would have thought a slightly better performance given the way Australian banks have moved out of cycle in setting residential mortgage rates – a large earnings contributor for all of them. 

Lending growth of 4% is slightly sluggish and will need to improve during the second half. Wealth management was also a drag, given the way financial markets have behaved, but again there is scope for improvement in the second half. 

Bottom line: It’s a solid result but one which might slightly disappoint the optimists. ANZ’s shares have run up nicely in anticipation of the strong earnings numbers and we think they could hold steady going into the ex-dividend period then coming off a touch. 

We would be taking profit and probably buying some Westpac should the shares sell off today on the ANZ announcement. Westpac had a relatively weaker first quarter and we think the second quarter result will surprise on the upside. 

For those seeking a long term Asia Pacific exposure, ANZ is our topic pick. Returns on equity just shy of 16% are much superior to regional peers. 

There is a clear cut strategy and a strong underlying Australian franchise.