A serious beat. That's the verdict on ANZ's (ANZ) whopper $6.498 billion full-year cash earnings result.
In what appears to be its strongest result in years, ANZ today delivered an earnings performance that easily exceeded expectations on almost every possible measure.
It is a result that not only justifies the recent surge in the bank's share price to record levels but which should cause most investors and analysts to rethink and rerate the organisation, providing ample fuel to propel the share price higher and take the other banks and the general market with it.
Raising the dividend 13% will be enough to see ANZ pushed higher today.
Core businesses operations such as mortgages outpaced expectations, while the drop in bad and doubtful debts and lower provisions combined to push cash earnings 11% higher.
Return on equity rose 20 basis points to 15.3%, costs to income dropped sharply both in Australia and New Zealand, lending performance improved while deposits jumped sharply, thereby decreasing the bank's reliance on wholesale funding markets.
In addition, the bank is well capitalised under the new Basel III rules.
ANZ's point of difference is its focus on Asia, what it dubs its "super regional strategy". The plan is to lift revenue from Asia to around a third of overall income by 2017 and it is now well on the way to achieving that aim through disciplined acquisitions and a focus on organic growth. It now sources 21% of revenue from Asia.
The Asian strategy, however, has not been without its critics with many pointing to the fact that Asia is a far more competitive market with skinnier margins. In his presentation this morning, ANZ boss Mike Smith conceded that competition in the region was tough and would remain so in the immediate future.
That partly explains the reticence of investors to fully embrace the strategy. ANZ is ranked fourth among the big four, even after the strong rise in its share price in the past two months.
It is priced at just 1.8 times its book value, well behind the leader the Commonwealth which is priced at 2.5 times book value.
This morning's result should see a narrowing of the gap in coming weeks.