ANZ's Chief Financial Officer, Michelle Jablko, recently shared insights into the bank's financial standing amidst the ongoing COVID-19 crisis. Following a $1.7 billion provision charge to bolster credit reserves, ANZ maintains a strong capital position due to conservative portfolio and balance sheet decisions made over the past four years.
Jablko highlighted that ANZ is well-positioned to support customers and protect shareholder interests despite economic uncertainties. She outlined three key pillars safeguarding the bank's balance sheet: liquidity, funding, and capital.
ANZ has secured access to an additional $12 billion in funding through the Reserve Bank of Australia's Term Funding Facility. This flexibility allows ANZ to avoid term funding markets for an extended period if necessary. The bank also boasts a CET1 ratio of 10.8%, or 15.5% on an internationally comparable basis.
For the first half of 2020, cash profit from continuing operations fell by 51%, primarily due to higher credit provision charges and a $1.038 billion impact from large notable items, including an $815 million impairment on associate investments.
The bank reported revenue declines in its Australia Retail and Commercial segment but saw a 10% increase in its Institutional business driven by market volatility and increased customer hedging activity.
Jablko emphasized that COVID-19 significantly impacted provisions as ANZ increased its credit reserves by $1.4 billion. The collective provision balance now stands at $4.5 billion, reflecting more negative economic forecasts rather than customer downgrades or increased delinquencies.
With significant uncertainty surrounding the broader economy, Jablko noted three factors influencing ANZ's approach to capital and dividends: impacts on earnings and risk weight migration; use of existing capital buffers; and disciplined responses involving capital allocation, balance sheet growth, and productivity measures.
ANZ plans to provide further updates on the operating environment in August during their Pillar3 disclosures.