(Reuters) -ANZ Group announced a new A$2 billion ($1.32 billion) share buyback on Tuesday despite reporting a 7% slump in first-half cash earnings due to intense competition in Australia’s mortgage lending market coupled with higher operating expenses.
Profit for Melbourne-listed lender’s retail division, one of the biggest profit generators for ANZ, plunged 25% during the first half to A$794 million as high-interest rates and a competitive home loan market weighed it down.
ANZ is the latest Australian bank to announce a share buyback. Larger rivals National Australia Bank and Westpac announced their own share buybacks earlier this month.
“Our strong balance sheet position today, the board felt comfortable with announcing an A$2 billion on-market share buyback,” ANZ Chief Financial Officer Farhan Faruqui said.
“We also continued to further simplify the bank, including completing the partial sale of our stake in Malaysia’s AmBank, releasing A$668 million in capital,” ANZ CEO Shayne Elliott said, referring to the factors contributing to the buyback.
Australian banks have allowed margins to fall over the last year as they struggle to compete in an intense home loan market, resulting in the lender posting a first-half net interest margin of 1.56%, down 19 basis points.
However, high rates of interest and inflation in the country have put a lid on borrowing capacity among Australians even as competition has heated up within the sector.
The country’s fourth-largest bank said cash profit was A$$3.55 billion ($2.35 billion) for the six months ended March 31, compared with A$3.82 billion a year ago and beating a Visible Alpha consensus estimate of A$3.54 billion, compiled by UBS.
The Melbourne-listed lender also declared an interim dividend of 83 Australian cents apiece, up from 81 Australian cents per share a year earlier.
($1 = 1.5099 Australian dollars)
(Reporting by Roshan Thomas and Poonam Behura in Bengaluru; Editing by Tasim Zahid)
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