Analyse af Australia and New Zealand Banking Group.
Analyst Note, 17. februar, David Ellis
Wide moat-rated Australian and New Zealand Banking Group, or ANZ Bank, is on track for another solid year of profit and dividend growth despite a softer-than-expected first-quarter fiscal 2015. The unaudited cash profit of AUD 1.8 billion for the quarter is 3.5% higher than a year ago but broadly flat on the average of the two previous quarters. Despite respectable headline profit growth, composition is a worry with poor trading income, weaker net interest margins and higher costs causing the softer underlying performance. No full-year guidance was provided other than the dividend payout is expected to be at the top of the 65% to 70% target range. Impressive volume growth again featured, with ANZ Bank's super-regional strategy delivering 9% growth in deposits and an 8% increase in loans. Net interest margins suffered, down 6 basis points on second-half fiscal 2014 as a result of foreign exchange impacts, lower global markets and higher liquidity requirements. A lower-than-expected bad debt expense of AUD 232 million is positive and was in line with the average of the two previous quarters--no concerns here.
Despite softer margins, strong volume growth drove revenue growth above the quarter average for fiscal 2014 but, disappointingly, expense growth was also higher. Strong deposit growth across all geographies was a highlight. There is no change to our positive view on the wide moat bank but we revise down our fiscal 2015 cash profit forecast to AUD 7.5 billion from AUD 7.7 billion. Sharply lower net interest margins surprised in the quarter and we reduce full-year forecast margin to 2.07% from 2.14%. The fiscal 2015 bad debt expense forecast is reduced to AUD 980 million from AUD 1.1 billion, reflecting continued improvement in loan quality. Despite the lower earnings forecast, our AUD 39.00 fair value estimate on ANZ Bank is unchanged with the stock moderately undervalued, trading 10% below valuation.
Bulls and bears say
Bulls say
- ANZ Bank is the only Australian bank with a strategy to take advantage of Australia's links with Asia, the fast-growing emerging market region. Trade flow between Asia and Australia are strong and are expected to grow over time.
- The Asian regional growth strategy includes acquisitions, but the target for 25% to 30% of earnings by 2017 is achievable through organic growth alone. This reduces risk.
-The super-regional strategy should begin to boost earnings growth, compensating for the subdued growth available in the Australian banking system.
Bears say
- The super-regional strategy requires substantial upfront investment in banking infrastructure. This will restrain regional earnings growth until ANZ Bank can drive faster banking and fee income.
- The normalisation of institutional bad debt expense from the peak of the global financial crisis has finished. This removes a convenient source of earnings growth at a time when less revenue growth is available in Australia.
- When wholesale funding costs rise, interest margins come under pressure. In such circumstances ANZ Bank might not be able to pass on higher funding costs and still retain desirable market share.
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