ANZ 'Stressed' and 'Impaired' loan trend: 2012 to 2016
Quote:
Originally Posted by
Snoopy
So how does the five year picture for the 'stressed loan' position of the ANZ Bank unfold? And could we have used this picture to predict the capital raising of FY2015 before it was announced?
|
"Stressed' Loans on the books (X) |
Net Financial Recivables (Impairment deducted) (Y) |
(X)/(Y) |
Impaired Loans |
Gross Financial Recivables (Z) |
(W)/(Z) |
FY2012 |
$11,639m |
$425,188m |
2.74% |
$2,635m |
$427,823m |
0.6159% |
FY2013 |
$12,099m |
$481,575m |
2.51% |
$2,311m |
$483,886m |
0.4776% |
FY2014 |
$12,319m |
$520,859m |
2.37% |
$1,552m |
$522,141m |
0.2972% |
FY2015 |
$13,142m |
$569,535m |
2.31% |
$1,403m |
$570,938m |
0.2437% |
FY2016 |
$14,052m |
$575,139m |
2.44% |
$1,368m |
$576,507m |
0.2373% |
The above chart shows a steady decrease in 'impaired loans' as a percentage of all loans. The rights issue capital injection happened just prior to the end of FY2015. But the impaired loan picture was steadily improving before then.
Contrast this to the 'stressed loan' picture, steadily getting worse in dollar terms. However in percentage terms it was falling too (until FY2016), albeit not as fast as the percentage picture of impaired loans.
So my predictor statistic, for checking out the likelihood of a capital raising has failed its purpose :-(. Or has it?
SNOOPY
Buffett Point 1/ FY2016: Top Three Position in Chosen Operating Markets
I aim to assess whether the ANZ Bank is a suitable candidate to which to apply the (Mary) 'Buffett' growth model .
Parent ANZ, incorporated in Australia, describes the operation of their business in the FY2016 Annual Report as follows:
1/ Raising funds through customer deposits and wholesale debt markets.
2/ Lending those funds to customers in both the 'personal lending' (personal home loans, credit cards, overdrafts) and business (corporate and institutional lending).
3/ Operating 'funds management', 'insurance' and 'superannuation' divisions.
The business is based around strong Australian and New Zealand foundations, leveraging 'geographic footprint' and 'market leading service'.
The business objectives are to support:
1/ Australian and New Zealand homeowners and small business customers,
2/ Regional Trade and Capital Flows for business customers via the IIB ("International and Institutional Banking Division".)
3/ A 'digital ready infrastructure'.
Major Competitors in this sector are listed in order by $A revenue (interest income).
1/ Commonwealth Bank of Australia: $33,817m
2/ Westpac Bank: $31,822m
3/ ANZ Bank: $29.951m
4/ National Australia Bank $27,629m
Conclusion: As number three in the market, ANZ passes the first Buffett Point test.
SNOOPY
Buffett Point 2/ FY2016: Sustainable 'eps' trend
The trend below is required to track higher for five years with one setback allowed.
Financial Year |
Net Sustainable Profit (A) |
Shares on Issue EOFY (B) |
eps (A)/(B) |
2012 |
$6,132m |
2,744m |
$2.24 |
2013 |
$6,599m |
2,757m |
$2.39 |
2014 |
$7,111m |
2,757m |
$2.58 |
2015 |
$7,130m |
2,903m |
$2.46 |
2016 |
$6,834m |
2,927m |
$2.33 |
Result: Fail Test
SNOOPY
PS Readers may notice a divergence between some of these 'eps' figures and those published elsewhere. The figures I use are 'normalised' by a number of adjustments. For example the FY2016 and FY2015 'normalised profits' are calculated as follows (Most adjustments may be found under the 'Non Interest Income' (Note 4) and 'Expenses' (Note 5) sections of the "FY2016 Annual Report":
|
FY2016 |
FY2015 |
Declared NPAT 'Cash Profit' |
$5,889m |
$7,216m |
add Movement on other Financial Instruments at fair value through profit & loss |
+0.7x $214m |
-0.7x $241m |
add Impairment charge from AMMB Holdings Berhaud |
+0.7x $260m |
remove Gain on selling stake in Bank of Tianjin |
-0.7x $29m |
remove Gain on Ensada divestment |
-0.7x $66m |
remove Loss on CVA methodology change |
+0.7x $237m |
add back Restructuring charges |
+0.7x $278m |
+0.7x $31m |
add back Amortising & Impairment of Other Intangibles |
+0.7x $83m |
+0.7x $88m |
add back Software Amortisation Policy Change (Incremental) |
+0.7x ($556m- $188m) |
Total |
$6,834m |
$7,130m |
Not everyone may agree with the way I have done these adjustments. But if you want a picture of the ongoing profitability of ANZ you have to do them. I see that someone has quoted the eps figure from the 4-traders website for FY2016 as $1.89 per share.
If you just pull the headline profit figure out of the annual report of $5,709m and divide by the number of shares on issue I get:
$5,709m / 2,927m = $1.95
Not sure how they got down to $1.89. But I would describe that figure as seriously misleading (a 20% error) and not reflective of the underlying performance of ANZ for FY2016. I just wanted to make the point of not believing everything you read on some of these websites! Even using ANZ's preferred metric of cash profit this is down by 18% YOY. The impression might be that ANZ has a disastrous year. Yet taking out the 'one off' adjustments, my representative profit declined by only 4%. An unwelcome development, but not something that I would dub a major concern.
When making these adjustments it is not always clear which pieces of data should be adjusted. I am working from something called the 'cash profit'. AR2016 p18 shows that to make the bridge between ''statuatory profit' and 'cash profit' you make the following adjustments:
a/ Allow for treasury share dividends.
b/ Correct for Revaluation of policy liabilities
c/ Correct for economic hedges
d/ Correct for revenue hedges
e/ Correct for 'Structured credit intermediation trades'
These adjustments have already been made if you start with 'cash profit'. So when perusing Note 4 and Note 5, I paid particular attention not to adjust for these items again, as to do so would have been 'double counting.' Did I get all my adjustments right? I can't say. But I have tried to be consistent with my adjustments. In a multi-year comparison I think being consistent is more important than chasing down the last decimal point of accuracy.
SNOOPY
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Quote:
Originally Posted by
Snoopy
...I see that someone has quoted the eps figure from the 4-traders website for FY2016 as $1.89 per share.
If you just pull the headline profit figure out of the annual report of $5,709m and divide by the number of shares on issue I get:
$5,709m / 2,927m = $1.95
Not sure how they got down to $1.89. But I would describe that figure as seriously misleading (a 20% error) and not reflective of the underlying performance of ANZ for FY2016. I just wanted to make the point of not believing everything you read on some of these websites!
ANZ FY2016 Annual Report, Page 62, Income Statement for the year ended 30 September, Earnings per ordinary share (cents), Diluted, 189.3
You really should read the reports carefully.
Paper Tiger
Buffett Point 3/ FY2016: Return on Equity history
The table is required to have an ROE figure of >15% for five years in a row, with one setback allowed.
Financial Year |
Net Sustainable Profit (A) |
Shareholder Equity EOFY (B) |
ROE (A)/(B) |
2012 |
$6,132m |
$41,240m |
14.9% |
2013 |
$6,599m |
$45,603m |
14.5% |
2014 |
$7,111m |
$49,284m |
14.4% |
2015 |
$7,130m |
$57,353m |
12.4% |
2016 |
$6,834m |
$57,927m |
11.8% |
Result: Fail Test
By way of comparative observation though, despite ANZ ROE suffering a declining trend while the Heartland ROE trend is rising, the ANZ ROE in absolute terms remains noticably superior to Heartland
SNOOPY