(Bloomberg) -- Australia & New Zealand Banking Group Ltd. shares fell by the most in six months Thursday after the lender changed the way it paid dividends that will see investors pay a higher amount of tax on the funds.
The bank lowered the amount of the payout that is eligible for franking credits -- which allow Australian shareholders to reduce the tax they pay on income from dividends, marking the first time since 1999 that it hadn't covered 100% of the tax burden.
At the same time, the bank reported a fall in cash profit from its ongoing operations, lower margins, a decline in its return on equity and an increase in bad debt charges for the 2019 financial year.
| For a full breakdown of ANZ's earnings results: |
|---|
| Dividend Bonanza Starts to Crack at Australia's Banks |
| ANZ Bank Profit Stagnates Amid Low Rates, Customer Remediation |
| ANZ Bank Sees Challenging Trading for ‘Foreseeable Future' |
Here's what analysts are saying:
Bell Potter:
- Result was ‘soft and underwhelming' with cash profit missing consensus
- Expectations of challenging conditions likely to damp ROE in medium term, capping its valuation
- Bank likely to hold onto its surplus capital, although won't cut dividends as a result
- Expect subdued operating income and higher costs to offset favorable credit impairment result
- Cut to hold from buy; PT lowered to A$28 from A$29.30
Shaw & Partners:
- ANZ has low returning Australian business and too much investment offshore, with the situation unlikely to improve ahead of New Zealand rule changes; Dividends unlikely to be fully franked in future
- FY20 likely brings little to no income growth, higher expenses growth and increased capital intensity
- “ANZ has the worst franchise of the major banks and it's making the least of its
opportunities”
- Maintain hold; PT cut to A$26 from A$27
Citi:
- Key drivers of ‘relative outperformance' seem to have run their course as FY20 guided to cost growth resuming and suspension of share buyback
- Lender is lowering its hurdle rate to increase investment opportunities, particularly in institutional banking
- Australia to remain challenged in FY20 with performance more in line with peers
- Ultra-low rates have forced ANZ to change tack to find growth; Benign credit environment to keep payout stable and provide valuation support
- Maintain neutral; PT lowered to A$28 from A$29
Morgan Stanley:
- Downgrade cycle is accelerating amid falling revenues and rising costs; Expect consensus estimates to be lowered about 10% and dividend will be cut
- No clear path to cost base target of about A$8 billion ($5.5 billion); Morgan Stanley says will be a ‘challenge' for cost base to be less than A$8.5 billion in the time frame
- New franking base of 70% makes a dividend cut ‘more likely' in 2020, MS lowers FY20 total payout target to A$1.40/share vs A$1.60/share in FY19
- Notes strong credit quality, although only expected to offer modest earnings support
- Maintain equal weight; PT cut to A$24.80 from A$26
Bloomberg Intelligence:
- ANZ Faces Margin, Volume and Cost Headwinds: Earnings Outlook
To contact the reporter on this story: Tim Smith in Sydney at tsmith58@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto Hosoda
©2019 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
