ANZ Bank shares fall amid concerns over earnings outlook

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(Bloomberg) – The shares of Australia & New Zealand Banking Group Ltd. fell on fears that cost pressures will bite into next year and earnings will be constrained.

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The stock fell 3.6% at midday in Sydney, the most in more than four months. This brings this year’s decline to 8.7% and continues its underperformance compared to its competitors. As earnings beat analysts’ estimates, chief executive Shayne Elliott said he expects the next six months to be challenging as cost-of-living pressures eat away at consumers’ purchasing power.

Lenders in Australia and New Zealand are benefiting from tighter central bank policies as borrowing costs for mortgages rise more than deposit rates. Yet with falling house prices and rising energy costs, investors are watching for signs of borrower stress.

“Looking ahead, we all know the world has entered a period of significant uncertainty,” Elliott said on a call with reporters.

The bank previously reported an increase in cash income from continuing operations to A$6.52 billion ($4.23 billion) in the 12 months to September 30 from A$6.2 billion. Australian dollars a year earlier. The results beat average expectations of A$6.29 billion from 11 analysts polled by Bloomberg.

Agreement with Suncorp

The bank signaled in July that it was ready to spend big on growth with a A$4.9 billion deal to acquire the banking arm of Suncorp Group Ltd., a smaller counterpart with a customer base in the state. from Queensland.

The deal, along with a restructuring of business silos and a revamped digital presence, underpins a strategy to attract a larger share of Australia’s new borrowers. With loan earnings expected to continue to grow after years of fierce competition in the industry, some analysts have questioned whether the repositioning will take effect as the economy slows.

“There is particular stress around the cost of living and the resulting rise in inflation expectations and slowing consumer confidence,” Elliott said on the call. “I cannot stress enough the impact that these cost of living pressures are having on the community. This is clearly a problem not only in supermarkets and petrol stations, but also with household utilities and now with the cost of housing itself, whether it be rent or mortgage repayments .

“Back Online”

Elliott said on Thursday that work to improve Australian home lending dynamics was paying off, “with application times back in line with peers.”

The main measure of the bank’s lending profit engine, its net interest margin, rose 10 basis points in the second half to 1.68%. Analysts expect the ratio to continue to climb as the ANZ passes on Reserve Bank of Australia cash rate hikes to borrowers and mortgage holders.

What Bloomberg Intelligence says

“Net interest income could rise about 20% on strong margin gains following the 10 basis point 2H rise to 1.68%,” Bloomberg Intelligence analyst Matt Ingram wrote on Thursday. and Francis Chan, but warned that “earning asset growth” of just 2% could limit the bank’s gains relative to its peers.

The bank will pay a final dividend of 74 Australian cents, in line with its target payout ratio of between 60% and 65%.

(Redesign throughout with share price decline, CEO comments.)

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