Expecting $5.83bn cash profit, 70¢ final dividend

ANZ’s result will come out on Thursday 28 October 2021 and our FY21 forecasts are: 1) statutory profit $5.78bn; 2) cash profit $5.82bn; 3) cash profit (continuing) $5.83bn; 4) cash EPS (continuing) 205¢; 5) final dividend 70¢ fully franked, 2H21 payout ratio 70% (42% in 2H20); 6) cash ROE (continuing) 9.4%; 7) group NIM (continuing) 1.64%; 8) credit impairment charge -$0.42bn/-7bp GLA ($2.74bn/44bp in FY20); 9) CIR (continuing) 52%; and 10) Level 2 CET1 ratio 12.0%.

Overall changes include lower net interest income (2% lower, mainly due to lower volumes and despite a 1bp increase in NIM in 2H21 from good NIM management) and lower other banking income (18% lower mainly from institutional banking although there was a gain of around 12% in 2H21) offset by lower operating expenses (the bank continues to manage costs relatively well, down from $4.78bn in 2H20 to $4.48bn in 1H21 and a forecast of $4.23bn in 2H21) plus a benefit in credit impairment charge in the first half of $0.49bn and back to an expense of $74m in 2H21 (as the industry further normalises). We expect CIR (continuing) to land at 52% in FY21 (51% in 2H21 vs. 53% in 1H21).

Price target $31.00, Buy rating unchanged

While we have made no changes in net interest and other operating income, we have decided to: (1) further lower operating expenses by $130m in FY21 and a similar amount in FY22, to arrive at an overall CIR of around 44% at the end of FY23 and FY24; and (2) increase the credit impairment charge by another $200m but only in FY22. The net impact on cash profit (continuing) is as follows: (1) FY21 +2%; (2) FY22 +1%; (3) FY23 nil; and (4) FY24 +3%. The theoretical composite valuation is marginally increased by around $1.00 to $31.33, thanks to higher DCF and dividend yield (sustainable). Nevertheless, we have left the price target unchanged at $31.00 being the mid-point of the value range of $30.36-31.33. Based on this price target and 12-month TSR in excess of 15%, we maintain a Buy rating on ANZ.

To read the full report click the button below.

View Detailed Report
Authored by TS Lim – Analyst – at Bell Potter Securities, 1 October 2021
Important Disclaimer—This may affect your legal rights: Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. This is general investment advice only and does not constitute advice to any person.
Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended.