Australia And New Zealand Banking Group Limited

An Announcement of Group Executive Changes: Australia And New Zealand Banking Group Limited (ASX: ANZ) had recently made an announcement with respect to the new management structure for Australia business in order to navigate the challenges which are being faced by the sector.It also ensures increased organisational alignment to reap the benefits of current market opportunities. The current group executives Mr. Mark Hand and Mr. Maile Carnegie would be sharing the responsibility for the financial performance of the bank’s business in Australia. The bank had earlier released scheduled APRA APS330 report which covers the quarter ended December 2018. The bank’s credit quality remained stable and it had provision charge amounting to $156 million which is below FY2018 quarterly average. The bank’s loss rate stood at 10 basis points. ANZ’s common equity tier 1 (or CET1) stood at 11.3% at the quarter end.

APRA Level 2 CET1 Ratio (Source: Company Reports)

Understanding ANZ’s Priorities: The bank has priorities which revolve around creating a simpler, better balanced bank, focus towards areas where it can win, building the superior experience so that it can compete in the digital age and driving purpose and values led transformation. Also, we expect that the bank is expected to be aided by its strong balance sheet and strong credit quality.

Stock Recommendation: The bank’s stock has delivered the return of 10.44% on YTD basis and, in the past three months, had given a 7.95% return. From the valuations perspective, the bank can be said to be more or less fairly valued. Its P/CF ratio stood at 8.2x which is in line with the industry median (Banking Services) of 8.2x. Also, its P/B ratio stood at 1.3x while the industry median is 1.4x.

Based on the above factors and strong balance sheet and credit quality, we maintain our “Buy” rating on the stock at the current market price of A$26.350 per share (down 1.014% on 15 March 2019).
 

Commonwealth Bank of Australia

Update on Wealth Management and Mortgage Broking Businesses: Commonwealth Bank of Australia (ASX: CBA) recently updated on the remediation and demerger plans with regards to its wealth management and mortgage broking businesses. The bank is prioritising implementation of the recommendations of the Royal Commission, refunding customers as well as remediating the past issues. Therefore, the bank suspended preparations for demerger to support the focus on the priorities. As stated in the bank’s half year results, $1,460 million had been spent or provisioned in order to address issues over the recent years which includes $1,215 million related to wealth management businesses. In 1H FY 2019, the bank posted strong core business outcomes even though there were challenges. The bank witnessed strong transaction deposit growth and its balance sheet was strengthened. The bank declared interim dividend per share amounting to $2.00. 

Interim Dividend (Source: Company Reports)

What to Expect From CBA: The bank is focused towards serving the financial needs of customers and also towards supporting the economy on the back of robust and resilient balance sheet. The bank focuses on simplification of the business, becoming the best in digital as well as a lead in retail and commercial banking. The bank is supported by operational risk and compliance, cost reduction, data and analytics as well as innovation. 
  
Stock Recommendation: The bank’s stock has generated decent returns from the past few months as, in the past three months, it delivered the return of 4.40% and, in the span of previous 6 months, it posted the return of 0.78%. Also, the bank is expected to be supported by the balance sheet strength. The bank’s annual dividend yield stood at 5.96% while the industry median (Financials) stood at 5.5%.

Therefore, considering the recent step of prioritising the implementation of Royal Commission’s recommendations coupled with decent outlook and dividend yield better than industry median, we maintain our “Buy” rating on the stock at the current market price of A$72.310 per share.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.