ANZ has paid a bumper dividend after the RBNZ lifted restrictions. Photo / Steven McNicholl
ANZ’s shareholders will be laughing all the way to the bank after its New Zealand arm paid a bumper dividend this year following restrictions put in place by the Reserve Bank were removed in July.
ANZ NZ’s latest financial disclosure statement shows it paid $1.924 billion in the year to September 30 to its Australian parent. The RBNZ bought in restrictions in April 2020 blocking banks from paying out dividends to their shareholders in a bid to shore up the local banks amid the coronavirus pandemic.
That was eased in March 2021 allowing banks to pay up to 50 per cent of their earnings but that restriction came off completely in July this year allowing the full resumption of dividends.
And it seems ANZ has wasted no time in scooping up some of the record profit it made in New Zealand.
ANZ NZ’s 2022 dividend is the highest it has paid to its parent since 2018 when it made a whopping $4.611b distribution. The 2022 year dividend is the second highest it has made in the last seven years despite protestations that it has had to hold on to more capital this year due to the RBNZ’s increased capital requirements.
Stock Takes will be watching with interest how much Westpac NZ and the BNZ have paid to their Australian parents with the annual disclosure documents due to be released in the coming weeks.
ASB, which reports out of cycle to the other three banks, had the unfortunate timing of its financial year ending on June 30, meaning its dividend payout was still subject to the RBNZ 50 per cent restriction.
It paid $860m in ordinary dividends to parent Commonwealth Bank of Australia, with a $27m profit repatriation on top of that. That compares to the total payout to its parent in 2021 of $39m. It managed to squeeze out a big dividend in 2020 of $3.363 billion which must have taken place before the restrictions came in.
Despite being under the restrictions the 2022 dividend payment was still higher than pre-Covid times. In 2019 it shelled $651m to its parent and in 2018 $574m.
ANZ’s disclosure documents also show it is facing potential enforcement action from the RBNZ over breaches of the anti-money laundering law.
The bank notes that it self-identified three prescribed transaction reporting (PTR) matters to RBNZ, where transaction reports had not been filed within the prescribed timeframe.
“RBNZ has informed the bank that it considers one of these matters (related to 6,409 transaction reports of a certain SWIFT message type) to be a material breach, and the other two to be minor breaches, of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 relating to PTR.”
The ANZ said that RBNZ’s enforcement team was considering this matter.
“The potential outcome of these matters remains uncertain at this time.”
ANZ is not the only bank to face AML challenges.
In July the BNZ was handed a warning under anti-money-laundering rules for failing to report the right locations for 50,000 cash transactions.
At the time the Reserve Bank said the formal warning was for domestic transactions in prescribed transaction reports between November 2018 and April 2020.
BNZ identified a technical coding error, which led to it providing the wrong location information.
In August last year the RBNZ also formally warned Westpac for failing to comply with anti-money laundering rules.
The central bank said Westpac’s internal systems failed to detect and report almost 8000 corporate transactions to overseas recipients between July 2018 and February 2019.
Westpac at the time identified an inadvertent mistake with a reporting system as the cause of the error.
The law requires financial service providers to report all overseas transactions worth more than $1000 to Police and the Reserve Bank.
However the Government earlier this month announced it would relax the money laundering law and give businesses an extended timeframe to submit prescribed transaction reports.
Sanford’s move to reinstate its dividend this week has not found favour with at least one analyst.
While Jarden’s Christian Bell upgraded his rating on the seafood company from underweight to neutral and increased his target price on the stock from $4.15 to $4.35 he noted that a reduction in debt would have been preferable to the dividend payout resuming.
“In a rising funding rate environment, for a business with historical earnings volatility, and steep capex profile (~$60m next five years), in our view it would have been more prudent to reduce debt further to lower the probability of equity capital or selling more quota, rather than resuming a dividend.”
Sanford announced on Tuesday it would begin paying a 10c a share dividend after a two-year hiatus.
The company posted a 244 per per cent lift in annual net earnings but said its profitability was still below pre-Covid levels.
Sanford’s earnings before interest and tax were $40.2 million. Bell said that was in line with its estimate of $40.5m and ahead of consensus expectations of $38m.
Bell upgraded his EBIT forecasts for the company for the next three years and said this reflected better pricing and foreign exchange tailwinds helping to improve margins as well as a lift in mussel volumes.
“This is offset by us lifting our capex profile better to reflect company guidance.”
Bell said the upgrade was due to the current risk-reward profile being more evenly balanced given share price weakness, as well as earnings momentum and little credit being given to the company’s long-term company targets.
“This is offset by a lack of track record and tight capital management for a business that remains in a deep investment phase.”
He noted the key risks were around getting enough labour, freight costs and execution.
Forsyth Barr is more upbeat on the stock with analysts Margaret Bei and Andy Bowley having an outperform rating on it with a target price of $4.80. But Bei and Bowley reduced their forecast for FY23 EBIT by 5 per cent off the back of a slower recovery in Sanford’s mussel business.
“The key change to our forecast earnings is a prolonged recovery in the mussel division. We previously anticipated adjusted EBIT of $2m in FY22 and $22m in FY23, but the difficulty in increasing processing capacity suggests we were too early in our recovery assumptions. Given management has identified attracting staff into the mussels division as the biggest operating challenge for FY23, we update our FY23 forecast to $8m (from $22m), and $22m in FY24 (from $27m), effectively a one year delay.”
But they expect strong price growth in Sanford’s wildcatch, salmon and mussel divisions due to demand, a weaker NZ dollar and improved product mix from portioning and premium retail exports.
“Mussel pricing is expected to be particularly strong due to a lag in contract prices which should cycle low Covid demand.”
All eyes will be on a2 Milk’s annual general meeting today as analysts look for a steer on the company’s recent sales from the singles day sales festival and its recent FDA approval to temporarily supply infant formula to the US market.
Jarden’s Adrian Allbon said its initial analysis suggested a2′s performance for the sales festival was likely to be solid and on plan for the company.
“However some uncertainty exists about the strength of sales volumes overall - with “Singles Day” moving from a 24-hour sale to a multi-week event and Alibaba Group opting not to disclose the final sales tally of the festival for the first time - potentially suggesting continued moderation in growth.”
Allbon is hoping the NZ dollar weakness and the FDA approval will prompt a revenue upgrade.
“At the FY22 results, management guided high single-digit revenue growth and modest margin accretion. As highlighted at the 1Q update, NZ$ weakness and recent FDA approval are factors that should underpin an uplift at the ASM.”
Allbon noted further details on the execution plan for the US entry would be of interest at the meeting but it may be too soon to provide an update to the market.
Jarden has a neutral rating on A2 with a target price of $5.70.
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