ANZ defers dividend as H1 profit plunges

ANZ will hold off paying shareholders an interim dividend after its first-half cash profit plunged 62 per cent on a $1 billion COVID-19 hit, with the bank tipping the virus' economic fallout could echo for up to five years.

The big four lender on Thursday deferred its first-half payout following guidance from prudential regulator APRA this month that banks and insurers should "seriously consider" doing so until the economic outlook is clearer.

A year ago ANZ made a payment of 80 cents per share, fully franked, and paid out the same amount in October - albeit at a lower franking rate - as it tallied the cost of low interest rates and refunds for past misdeeds.

Thursday's dividend deferral comes as ANZ's statutory net profit for the six months to March 31 fell 51 per cent to $1.54 billion on credit impairment charges of $1.674 billion.

This included increased credit reserves of $1.031 billion for coronavirus impacts.

Rival lender NAB this week made a $807 million provision for coronavirus losses and Westpac expects to take a $1.6 billion virus hit next week.

ANZ said valuation of investments in Asian associates was also impaired by $815 million during the half, largely due to the impact of the pandemic.

Cash profit plunged 62 per cent to $1.32 billion, or by 60 per cent to $1.43 billion when looking at continuing operations.

Total operating income dropped 4.0 per cent to $8.89 billion.

Common Equity Tier 1 Ratio - a key measure of stability - dropped from 11.5 per cent to 10.8 per cent, but the bank assured investors about its "strong capital position" amid the COVID crisis.

Chief executive Shayne Elliott said it was a "reasonable" first-half result but warned the coming months would be difficult.

He predicted the economy could take between three to five years to recover from the lockdown measures.

"The COVID-19 crisis has already evolved at such a pace it is difficult to predict how deep the economic crisis will be or how long the recovery will take," Mr Elliott said.

"It will be the most profound challenge some will experience in their lifetime."

The bank has so far received about 105,000 requests for six-month payment deferrals on $36 billion worth of home loans from customers struggling due to the crisis.

This represents 14 per cent of ANZ's mortgage portfolio.

Mr Elliott said ANZ had accepted some customers would not be able to go back to normal payments after the six months are up.

He said the bank is considering a suite of options, including partial repayments, a deferral period extension, or for struggling loan holders to be put on a hardship interest rate.

ANZ chairman David Gonski said the decision to hold off paying a dividend was not a reflection of his bank's financial health.

"The board agrees with the regulator's guidance that deferring a decision on the 2020 interim dividend is prudent given the present economic uncertainty and that making a decision at this time would not have been appropriate," Mr Gonski said.

"This was a very difficult decision and the board considered all options available as we understand the impact this will have on those shareholders who rely on dividends."

ANZ said it would "consider all factors" over the coming months and will continue to assess the evolving situation, including the severity of community lock-downs, before determining a final position on the interim dividend.

Shares in the lender fell by as much as 2.5 per cent but had risen 1.02 per cent to $16.83 by 1440 AEST.

NAB, which decided to slash its interim dividend to 30 cents instead of deferring it altogether, this week launched a $3.5 billion capital raising in a bid to buttress itself against a virus-driven economic downturn that more than halved its first-half cash earnings.

At ANZ, first-half cash profit at the major Australian Retail segment fell 29 per cent to $1.21 billion, while institutional banking earnings fell 40 per cent to $610 million.

NZ operations fell 25 per cent to $567 million

ANZ's net interest margin - income gained from a loan versus the cost of servicing it - dropped to 1.69 per cent from 1.72 per cent in September, and 1.79 per cent in March 2019.

ANZ FIRST-HALF ROCKED BY COVID-19

* Operating income down 4.0pct to $8.89bn

* Cash profit down 62pct to $1.32bn

* Net profit down 51pct to $1.54bn

* Interim dividend deferred

Austrlaian Associated PressBack to Breaking News

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