ANZ Bank(US:ANZGY)2020-10-29 05:28Financial Data and Key Metrics Changes - The company reported an after-tax cash profit from continuing operations of $3.76 billion, down 42% from the previous year [9] - Operating profit before provisions remained broadly flat, with a significant driver of profit reduction being a provision of $1.7 billion set aside for potential future losses [9][10] - Net tangible assets per share increased to $20.04, and the company paid $2.3 billion in company tax and over $400 million in additional tax under the bank levy [10] Business Line Data and Key Metrics Changes - The Institutional business performed well, with revenue up 13% for the year, driven by strong demand for hedging solutions and balance sheet trading [47] - Home loans showed renewed momentum, helping to offset amortization, while credit card and personal loan volumes decreased [45] - Small business loan extensions had positive outcomes, with over half finishing by mid-October and 86% returning to full repayment [20] Market Data and Key Metrics Changes - Retail and commercial deposits grew by $34 billion for the year, indicating strong customer liquidity [36] - The company experienced a significant increase in deposits, with offset balances growing by $5 billion [21] - Credit card lending decreased by 18%, reflecting a cautious approach from customers [21] Company Strategy and Development Direction - The company aims to simplify its operations and strengthen its balance sheet while focusing on productivity and purpose-led transformation [27] - There is a commitment to invest in sustainable finance, open banking, and data utilization to enhance customer propositions [31] - The company plans to reshape its portfolio to produce a more balanced, lower-risk business that generates predictable returns [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing economic and social impacts of COVID-19 but expressed confidence in the company's ability to support customers and invest in the future [7][8] - The outlook for margins is expected to remain under pressure due to low interest rates, but the company is prepared for changes in the economic environment [43][61] - The company anticipates that risk migration in FY '21 will be around 50 basis points, lower than previously expected [59] Other Important Information - The company has bolstered its collective provision reserves to $5 billion, double the amount before the adoption of AASB 9 in 2018 [53] - The company completed the sale of UDC in New Zealand and paid an interim dividend in September [39] - Management emphasized the importance of a strong culture and employee engagement during challenging times [13] Q&A Session Summary Question: Opportunities on costs looking forward - Management discussed the focus on driving down absolute costs, particularly in distribution and process automation, while maintaining investment for future growth [74][77] Question: Dividend payout ratio trajectory - The Board's long-term philosophy for the payout ratio remains around 60% to 65%, with considerations for economic conditions and capital position [82] Question: Pathway to $8 billion cost target - Management aims to provide greater clarity on the pathway to the $8 billion cost target by the first half result of the financial year, considering the impact of COVID-19 [84][86] Question: Outlook for credit growth, particularly in Institutional - The Institutional business saw a reversal in loan requests, with many customers repaying drawn-down loans as they accessed debt capital markets [90][92]