ANZ Bank(ANZGY) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an unaudited statutory profit for the quarter of $1.3 billion and a cash profit of $1.5 billion [14] - Common equity Tier 1 capital stands strong at 11.3% on a pro forma basis, without needing to raise additional capital from shareholders [14][29] - Pre-provision profit increased by 6% for the quarter, contributing 43 basis points to capital generation [30] Business Line Data and Key Metrics Changes - Australian home loans outperformed, with customers increasing savings and paying down credit card debt [17] - The markets business saw a 60% increase compared to the first-half quarterly average due to strong customer flows and underlying volatility [18] - Costs were down 1% for the quarter, attributed to disciplined cost management despite record investments in the business [20] Market Data and Key Metrics Changes - The company noted that while Victoria is facing challenges, Western Australia is performing well with stable iron ore prices, and parts of Queensland are showing recovery in agriculture [10] - The performance of the Institutional and International business highlighted the benefits of a diverse portfolio, with significant capital benefits from loan repayments [19] Company Strategy and Development Direction - The company aims to support customers through the pandemic while balancing shareholder interests and employee safety [9] - There is a focus on maintaining a strong balance sheet and liquidity, with a commitment to prudent investments in technology and customer support [12][22] - The company has taken a cautious approach to credit reserves, particularly in small business and commercial property segments [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges posed by COVID-19 but expressed confidence in the company's ability to navigate the crisis due to its strong capital position [12][14] - The company is adapting to a "COVID work-life" and is prepared to make real-time decisions to manage changes in the operating environment [11] - Management emphasized the importance of customer support, having already assisted around 200,000 customers with their loans [23] Other Important Information - The company announced an interim dividend of $0.25 per share, fully franked, reflecting a balance between supporting shareholders and maintaining a strong capital position [16][40] - The company has made significant investments in big data and real-time monitoring systems to better respond to customer needs [22] Q&A Session Summary Question: Commentary on net interest income and competition - Management noted that liquids had a 3 basis points impact on margin, with an increase of about $13 billion in liquids for the quarter [47] - The underlying margin was 7 basis points better than the headline margin due to various factors including low rates and changes in loan mix [48][49] Question: Proportion of deferred customers seeking extensions - Management indicated that they do not have a clear sense of how many deferred customers may seek extensions, but they are in contact with all customers to discuss options [50][51] Question: Trends in institutional borrowers and market income - Management expects a flat to down trend in institutional borrower repayments, depending on capital market conditions [62][66] - The markets business is expected to remain buoyant, although not as volatile as before, with strong performance continuing into the fourth quarter [68][70] Question: Details on SME loan deferrals and collateral - The majority of SME loans on deferral are secured by residential or commercial properties, with a focus on supporting good businesses affected by external circumstances [74][80] Question: Urgency of paying dividends now - Management justified the decision to pay a modest dividend based on strong capital generation and the need to support shareholders, particularly retirees [88][92] Question: Tail risk for customers on deferral - Management acknowledged that the crisis has disproportionately affected lower-skilled and lower-income workers, but noted that many customers on deferral are still current on their payments [94][96]