ANZ's Chief Financial Officer, Michelle Jablko, provided an overview of the bank's financial performance for the year 2020. The focus was on maintaining a strong balance sheet through capital management and credit reserves. Jablko noted that while profit decreased by 42%, this was primarily due to asset impairments and increased provision balances aimed at future protection.
"Yes, our Profit is down 42% and that’s a large reduction," she stated, explaining that actual credit losses were low and pre-provision earnings saw only a slight decline of 1%. Despite these challenges, ANZ managed to pay a higher final dividend of 35 cents per share.
Liquidity ratios exceeded regulatory minimums, supported by significant growth in retail and commercial deposits. "We’ve had very strong growth in retail and commercial deposits, up $34bn for the year," Jablko highlighted.
The bank also drew from the Reserve Bank of Australia's Term Funding Facility to manage term wholesale funding maturities. ANZ maintained its CET1 ratio at 11.3%, matching last year's figures despite COVID-19 impacts.
"We supported strong demand from our Institutional customers when they needed us," Jablko said, emphasizing their proactive approach in managing credit risk weighted assets while expanding less capital-intensive areas like home loans in Australia and New Zealand.
Jablko discussed the cash profit performance which faced reductions due to various factors including lower interest rates impacting Net Interest Margin (NIM). "NIM in the second half was down 10bps half-on-half," she noted.
Looking ahead, industry margins are expected to remain under pressure with potential further easing by central banks affecting deposit sensitivity. However, customer loan demand may help offset some margin impacts over time.
On cost management, ANZ achieved flat costs adjusted for foreign exchange rates with BAU savings contributing significantly. "COVID accelerated some productivity benefits," Jablko mentioned regarding increased digital channel preferences among customers.
Credit provisions saw substantial increases as part of cautious planning against potential losses from COVID-19 impacts. Collective provision reserves doubled compared to pre-AASB9 adoption levels in 2018.
Jablko concluded with an optimistic outlook based on current economic recovery trends being better than initially expected: "All of this has given our Board the confidence to pay a fully franked 35cps final dividend."
ANZ aims to continue supporting customers while managing resources effectively amid ongoing industry challenges.