ANZ reported yesterday, a modest miss relative to consensus (the dividend was above, but equivalent once you adjusted for the lower franking).
Operationally, it was solid, but perhaps not quite as strong as CEO Shane Elliot’s framing, “very strong”; “consistently strong”.
The reported NIM dropped back, after a much stronger first half, and prior year, really.
That weaker NIM was much more pronounced in the retail mortgage book, where NIMs fell more than 30bps, chasing growth, essentially. CBA, NAB, WBC had all pointed to “someone” pushing hard on mortgages, in the end it was Macquarie and ANZ. You can see all the other banks posted much more modest YoY numbers.
Mgmt commentary is “this is what I should be doing, being aggressive to win share, I won’t apologise for it”. The market reaction is “we want more rational competition, and don’t like what you are doing!”.
And that created pressure for a solid enough sell-off yesterday, in the ANZ share price (down some 3%).
Operating efficiencies remain comparable to peers…
…as do bad debts…
…ROE’s are depressed by the capital held back for the Suncorp bank deal (which we think will go through, but the market will probably take it fine either way)…
…and of course, given that extra capital, ANZ are near the top of the table by equity cushioning.
ANZ is on a PE of 11x compared to CBA on 17x. Same growth rate (indeed slightly faster) and just as well capitalised (slightly better).
CBA is higher quality, with a higher ROE, but we think that is more than reflected in the valuation differential.
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