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‘Very different economy’ – ANZ talks of winding back risk as earnings take a dip

ANZ’s half-year cash profit fell 3 per cent to $3.1 billion compared with the December half as the bank warned that the economic environment was “very different” and may require an adjustment in risk appetite and investment priorities.

May 04, 2022, updated May 04, 2022
ANZ is considering a return of capital to shareholders

ANZ is considering a return of capital to shareholders

The ANZ statutory profit for the half year was $3.5 billion, an increase of 10 per cent on the December half.

The bank, which along with the other majors lifted interest rates last night, said customers were emerging from the pandemic in a position of strength with healthy balance sheets and low levels of arrears across key segments.

It said some of the acute risks of the pandemic were receeding but rising inflation and interest rates, geopolitical events and the recent floods had led to a $618 million cost in “management overlays”.

Provisioning of $3.7 billion was also up $381 million on pre-Covid levels and earnings per share were down 2 per cent.

The bank would pay a 72 cents a share dividend, fully franked.

“ANZ is considering options for the best use of capital, including investing in additional growth opportunities or returning any capital excess to its regulatory requirements to shareholders,” chief executive Shane Elliott said.

“Looking ahead, the economic environment is likely to be very different and we will continue to adjust our risk appetite, business settings and investment priorities as required.

“We are already seeing increased demand from our business customers and we are well placed to continue to support them as they manage a world of higher inflation and interest rates.”

A report from stockbrokers Wilsons Advisory has also said sentiment has shifted to defensive stocks.

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“Energy, utilities and materials have performed better since the beginning of the year as investors have used commodities to hedge against inflation,” the report said.

“Rising bond yields have largely been to blame for the worst-performing stocks with high PE sectors like consumer discretionary and IT among the worst-faring.

“However, the narrative has changed slightly over the last month with defensives starting to outperform the market.

“Sectors like healthcare and consumer staples, along with utilities, have performed well against a backdrop of higher uncertainty around the US Feds and the RBA’s hiking expectations and the impacts this will have on the economy.”

 

 

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