ANZ locks down on capital burn

Ian Rogers

Almost carefree about Covid, ANZ is taking the easy road to splurge A$1.5 billion of capital – surplus capital, so-called – via an on-market share buyback.

This will kick off in August and probably not until the Pillar 3 disclosure and Trading Update scheduled for Wednesday, August 18th, the flash results for which the ANZ board will have digested already.

In a short statement yesterday ANZ Chairman Paul O’Sullivan said: “Despite the very real challenges being experienced by many of our customers, we have the financial strength to continue to support our customers, while also returning surplus capital to shareholders.

“After reviewing options, we consider an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment.

“Our capital position may allow future capital returns to be considered,” O’Sullivan said.

ANZ CEO Shayne Elliott’s canned quotes stuck with the industry messaging: “Just as we supported our customers through previous lockdowns we stand ready and able to provide assistance to those that need it,” he said.

“The strength of our business means we are well placed to fulfil needs of our customers and the broader community while still actively managing our capital,” Elliott said.

Well, as the table reminds readers (and drawing on bank-level data from APRA) 10 per cent of ANZ’s loans were in deferral peak panic, roughly this time last year. The bank worked that down to less than one per cent by February, at which point APRA ceased to share detailed data.

ANZ’s reported Level 2 and Level 1 Common Equity Tier 1 capital (CET1) ratios as at March 2021 were 12.4 per cent and 12.2 per cent respectively, “well in excess of APRA’s stated unquestionably strong capital requirement of 10.5 per cent,” the bank said.

The on-market buy-back is expected to reduce ANZ’s March 2021 CETI ratio by approximately 35 basis points.

The bank has a long term credit rating from Fitch Ratings of A+, AA- from S&P and Aa3 from Moody’s.