Managerial Finance Report on ANZ Banking Group Ltd

Introduction

The report is presented as an analysis of Australia and New Zealand Banking Group Ltd. that is listed on the ASX. This report will analyze the share price history, valuation techniques, successful actions taken for shareholders’ wealth maximization, dividend policy and capital structure of ANZ Group Ltd. over the period of last 12 months. 

Performance of ANZ Group over Past 12 Months

During the first half year of 2020, ANZ reported the statutory profit after tax of $1.55 bn (that came down by 51%) as compared to $3.17 bn in previous comparable period (1H2019) (Barbaschow, 2020). The cash-profit also declined by 60% followed by a further decline in EPS by 60% and ROE by 732 bps. The new EPS remained to by 49.4 cents as compared to 124.8 cents in 1H2019. The company also chose to defer the dividends (ANZ, 2020a). This whole decline in the operations of the company was primarily due to credit impairment charges of around $1.64 bn that also comprised of increased credit reserves during COVID-19 equivalent to $1.031 bn (ANZ, 2020a). 

The company faced a huge challenge of COVID-19 during past 10 months due to which it had to defer loan payments for over 180,000 customers and offering $16 bn additional lending to its long-term investment-grade institutional customer for supporting them throughout the period (Mirage News, 2020). However, due to its strong balance sheet and loyal customer base, the ANZ Banking Group Ltd. has emerged out to be a survivor in these pandemic crises. The group decided on deferring the budget salary increases in 2020/21 while focusing on rewarding the low-tier staff members who have been working hard. Overall, the company’s cash earnings per share also fell down by 60% to 50cents. However, it maintained a strong Tier 1 Capital Ratio of 10.8% uptil March 2020 even after bolstering its credit reserves to record levels. The liquidity of the group remained strong (Butler, 2020).

As seen above, the peak share price was reached on September 27th, 2019 at AUD 28.680. After that the prices started falling down. The share prices started declining due to COVID-19. On March 23rd, 2020 the Group’s share prices reached as low as AUD 14.100 (Smith, 2020). This was the peak period of COVID-19 as the economies around the world were collapsing. The gathering of more than 500 people got banned during March as many companies opt to close their offices and enforce the remote working. On 16th March, 2020, ASX experienced biggest one-day fall in decades where 30% value of the shares got wiped out from the index in less than just a month due to coronavirus-inspired panic selling (Butler, 2020). These issues caused the huge dip in share prices of ANZ Group after 21st Feb, 2020 till 23rd March, 2020. After this period, the prices experienced a roller coaster ride and presented a fluctuating rate over past 6 months (Smith, 2020). During March & April, ANZ Group experienced flux of share volumes trading in ASX due to panic caused by COVID-19. Currently, the company’s share price is trading at AUD 16.850 with volume of 7,065,168 as at 21st September, 2020 (Barbaschow, 2020).