ANZ Group's H1 2025 Earnings: Strong EPS Growth Masks Revenue Challenges

The Australian banking sector has long been a bellwether for the health of the country’s economy, and ANZ Group Holdings Limited’s (ASX:ANZ) first-half 2025 results offer a mixed picture of resilience and lingering headwinds. While the bank delivered a robust beat on earnings per share (EPS), revenue growth fell short of expectations, underscoring the complexities of operating in a volatile global environment. Let’s dissect the numbers and their implications for investors.

Financial Highlights: A Tale of Two Metrics

ANZ reported a statutory profit after tax of AUD 3.64 billion, up 16% year-on-year, driven by strong credit performance and cost discipline. The basic EPS rose to AUD 1.225, a 7.9% increase from AUD 1.135 in the prior period, comfortably surpassing analyst estimates. This outperformance was fueled by synergies from its 2023 acquisition of Suncorp Bank, which contributed $251 million in net profit after tax (NPAT) in its first full half under ANZ ownership.

However, the revenue narrative was less rosy. While Cash Profit—a non-GAAP measure—reached AUD 10.995 billion, a 5% rise, the bank noted that actual revenue (statutory operating income) grew just 1% to AUD 7.1 billion, lagging behind the consensus expectation of a 3% increase. This discrepancy highlights a divergence between core operations and strategic gains.

Strategic Drivers: Suncorp Integration and ANZ Plus Momentum

The acquisition of Suncorp continues to be a pivotal factor. Beyond its immediate NPAT contribution, Suncorp’s integration delivered $20 million in cost savings ahead of schedule, with deposits and lending growing over 16% since the deal closed. Meanwhile, ANZ’s digital banking platform, ANZ Plus, reached 1 million customers, with deposits surpassing $20 billion. Notably, 50% of ANZ Plus retail customers now consider ANZ their primary bank, a critical milestone for the bank’s digital transformation.

The credit portfolio also performed admirably. Annualized credit losses fell to just 4 basis points, with 83% of Australian home loan customers ahead on repayments. This resilience, despite rising macroeconomic uncertainty, reflects ANZ’s conservative risk management.

Divisional Performance: Markets Outperform, Banking Faces Margin Pressure

• Banking Division: Revenue increased 5%, but net interest margins (NIM) compressed 6 basis points due to Suncorp’s lower-margin business mix. Retail fee income dipped seasonally, though institutional and commercial divisions delivered strong returns (13% and 25% RoE, respectively).
• Markets Division: Revenue surged 15% in Q2 to $1.07 billion, driven by record debt capital markets fees and elevated client hedging activity. This division now accounts for nearly 10% of total revenue, up from 8% a year ago.

Cost Management and Capital Strength

Total expenses rose 4%, largely due to Suncorp’s full integration. Excluding this, costs fell 1%, with $133 million in productivity savings achieved through technology investments and workforce reshaping. The CET1 capital ratio strengthened to 11.8%, providing a buffer against potential shocks. ANZ also extended its $2 billion buyback program, with $1.2 billion completed, signaling confidence in its capital position.

Risks and Challenges Ahead

• Margin Pressure: The NIM contraction and competitive lending rates pose a long-term threat to profitability.
• Global Volatility: ANZ’s exposure to Asia-Pacific markets leaves it vulnerable to trade tensions and currency fluctuations.
• Leadership Transition: Incoming CEO Nuno Matos inherits a bank navigating legacy IT systems and regulatory scrutiny, with cost growth expected to rise 4% year-on-year in FY2025.

Conclusion: A Bank on Solid Ground, But Not Without Hurdles

ANZ’s H1 results paint a picture of a bank leveraging strategic acquisitions and digital innovation to offset macroeconomic headwinds. The 16% EPS growth and 11.8% CET1 ratio demonstrate operational resilience, while the $20 billion ANZ Plus deposit base signals a shift toward sustainable retail growth.

However, the lag in revenue growth and margin pressures warrant caution. Investors should monitor whether ANZ can sustain its cost discipline and expand margins amid rising competition. The bank’s 7% net profit growth and $7.1 billion in operating income provide a solid foundation, but the path to consistent top-line expansion remains uncertain.

For now, ANZ’s dividend of 83 cents per share (70% franked) and strong balance sheet make it a defensive play in a turbulent market. But with $52 million in macroeconomic provision overlays and Suncorp’s integration costs still unfolding, the full benefits of its strategies may take time to materialize. Investors seeking stability will find ANZ attractive, but those chasing rapid growth may need to look elsewhere.