ANZ joined the bank buyback party on Tuesday. Investors love getting excess capital back, but do these buybacks show the banks are short of growth options?
Already a subscriber?ANZ brought the curtain down on the interim bank reporting season on Tuesday by reminding Australian investors why they love bank stocks so much.that chief executive Shayne Elliott announced followed a $1.5 billion buyback at National Australia Bank and a $1 billion buyback and special dividend at Westpac.
Buybacks do boost the return on equity and earnings per share – key criteria in most bank remuneration plans. But this round of buybacks raises interesting questions about where long-term growth will come from. Investors need to choose – more carefully than ever – which banks they want to own. “Importantly, we don’t run the bank to generate capital to buy back shares. But there’ll be times in the cycle when those things happen, just like there was a time in the cycle where we issued capital because we wanted to buy growth when we wanted to buy Suncorp Bank.”
“Let’s remember what we’re buying. We are really buying 1.2 million customers, and ... we are buying $50 billion worth of deposits, and our job is to really satisfy those customers and give them superior service,” he says.Elliott also joined his peers at NAB and Westpac in celebrating a more resilient result from his business bank, where the net interest margin and return on risk-weighted assets rose, despite lower cash profits and revenue.
The way the institutional business is growing is a case in point. It is not being driven by lending but by ANZ clipping the tickets on the processing of a staggering $164 trillion in payments every year. Revenue in ANZ’s markets business rose 30 per cent half-on-half, with much of that growth coming from outside Australia.
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