Australia And New Zealand Banking Group Limited

ANZ Details

Resilient Performance in June Quarter: Australia And New Zealand Banking Group Limited (ASX: ANZ) is one of the leading banks in Australia focused on providing decent returns to its shareholders, while achieving a balance between return and growth. As at 25 September 2020, ANZ’s market capitalisation stood at ~$47.85 billion.

June Quarter Highlights: For the June 2020 quarter, the company reported unaudited statutory profit of $1.3 billion and a cash profit of $1.5 billion, both higher than 1H20 quarterly average, despite the challenges caused by the COVDI-19 pandemic, demonstrating the strength of ANZ’s portfolio. During the period, the company’s markets business was up 60% on the first half quarterly average. ANZ enjoys a decent capital position with a Level 2 Common Equity Tier 1 capital (CET1) ratio of 11.1% at 30 June 2020, higher than 10.8% in March 2020 quarter. In a recent dividend update, the company informed that it is going to pay an interim dividend of A$0.25 per share on 30 September 2020.

H1FY20 and 3Q20 Performance (Source: Company Reports)

Distribution Update: In a recent update, the Bank informed that it is going to pay a distribution of A$1.16 on each security of ANZPE - CAP NOTE 6-BBSW+3.25% PERP NON-CUM RED T-03-22. The distribution has a record date of 16 March 2021 and a payment date of 24 March 2021. In another update, ANZ informed that it is going to pay a distribution of A$1.28 on each security of ANZPF - CAP NOTE 6-BBSW+3.60% PERP NON-CUM RED T-03-23. The distribution has an ex-date of 15 March 2021 and payment date of 24 March 2021.

Completes sale of UDC Finance: In order to simplify its business, ANZ recently completed the sale of its asset finance business in New Zealand, UDC Finance, to Shinsei Bank Limited. This transaction is expected to further strengthen ANZ’s balance sheet.

New Chairman Appointment: The Bank recently appointed Paul O’Sullivan as its new Chairman. Mr O’Sullivan is currently Chairman of Western Sydney Airport Corporation and previously held senior executive roles with Singapore Telecommunications (Singtel) and Optus.

Outlook: With a robust balance sheet, the Bank seems well placed to navigate through COVID-19 pandemic. Further, ANZ is committed to achieving its $8 billion cost ambition.  

Valuation Methodology: P/BV Multiple Based Relative Valuation (illustrative)

P/BV Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last six months, the stock of ANZ provided a return of 13.6% and is inclined towards its 52-weeks low level of $14.1, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$16.89 and a resistance of ~$21.05. We have valued the stock using P/BV multiple based illustrative valuation method and have arrived at a target price with low double digit-upside (in % terms). For the purpose, we have taken peers like Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Commonwealth Bank of Australia (ASX: CBA). Considering ANZ’s resilient performance in June 2020 quarter, decent capital position and current trading levels, we give a “Buy” recommendation on the stock at the closing price of 17.93, up by 6.283% on 25 September 2020.

ANZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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