Guide to ANZ's Half Year 2018 Results
A Guide to the Result including Large/Notable Items
On Tuesday 1 May, ANZ will announce its Half Year financial results to 31 March 2018. In advance of that announcement, the Group is releasing information to assist market participants preparing to analyse the Group’s financial performance.
Classification of sold Wealth Australia businesses as Discontinued Operations
ANZ announced two separate Wealth business transactions in 2017.
- Sale of the OnePath pensions and investments (OnePath P&I) and aligned dealer groups (ADG) business to IOOF Holdings Limited on 17 October.
- Sale of the life insurance business to Zurich Financial Services Australia on 12 December.
In ANZ’s 1H18 Results Announcement the results of these businesses will be classified as ‘Discontinued Operations’ in accordance with accounting standards, and shown separately from the ‘Continuing Operations’ of ANZ. Prior period comparative results will be restated to reflect this.
Discontinued Operations’ assets and liabilities have been reclassified as at 31 March 2018 as held for sale and measured at the lower of their carrying value and fair value less costs to sell. Consequently, a $632 million loss has been recognised, comprising a $277 million net loss on measuring the assets and liabilities at fair value (including a treasury shares adjustment of $396 million) and future separation and transaction costs to complete both transactions of $355 million.
This loss, together with the operating results of the held for sale businesses and separation costs incurred to date, form the ‘profit from Discontinued Operations’ in ANZ’s 1H18 Results Announcement. A template providing the ANZ Financial Year 2017 Group Profit and Loss on a continuing basis is in the support pack released with this announcement.
Disclosure of Retained Wealth Australia Businesses
The retained Wealth businesses - ANZ Lenders Mortgage Insurance, ANZ Share Investing, distribution of General Insurance products and ANZ Financial Planning - will be disclosed separately within ‘profit from Continuing Operations’. The profit for these retained businesses in FY17 was $95 million before group elimination adjustments.
The Group has incurred ~$80 million in restructuring charges within Cash Profit in 1H18; this compares to charges of $26 million and $36 million in 2H17 and 1H17, respectively. In large part, the 1H18 charges relate to the implementation of agile ways of working in the Australia Division.
Legal and other costs relating to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry are currently expected to be in the range of $50 million for the year ending 30 September 2018 and were $16 million in 1H18. ANZ is committed to engaging with the Inquiry in an open, constructive and transparent manner. ANZ is unable to predict the outcome of the Inquiry or its impact on the bank or broader industry.
Corporate Business moved to Institutional Division
The Corporate business, formerly part of the Corporate and Commercial Banking business within the Australia Division, is now part of Institutional Australia. A template showing the restated comparative Profit and Loss for the Australia Division and Institutional Division is in today’s pack.
Large/Notable items within continuing operations
Consistent with the Group’s practice in FY17, ANZ will disclose a summary of large/notable items, which are included within the cash profit of its continuing operations.
The large/notable items for 1H18 relate to the impact of divestments on continuing operations, including any gains or losses on sale and the operating results of businesses that will no longer form part of future cash profit results.
The total net gain on sale from divestments in 1H18 is $138 million comprising:
- An $85 million net gain on sale for the Asia Retail and Wealth businesses, including a gain on sale for Vietnam retail.
- A loss on sale of SRCB in the current period of $86 million. This includes the offset to equity accounted earnings of $58 million (recognised in cash profit in 1H17 and identified as a large/notable item) which increased the carrying value. Allowing for this, the total net loss is $28 million reflecting additional hedging and tax costs associated with the extended completion.
- A $121 million net gain on sale for the first tranche of MCC. The sale of the second tranche is subject to a put option exercisable in the fourth quarter of FY18.
- An $18 million cost recovery related to UDC.
The derivative valuation adjustment charge for the Institutional Markets business is not material in 1H18. The charges for 1H17 and 2H17 are shown in the large/notable items template.
The materials lodged today with the ASX, including supporting templates are all available on shareholder.anz.com