This report is an updated version of the report published on 20^th October 2022 at 5:17 PM (GMT +13)

Australia and New Zealand Banking Group Limited

ANZ Details

Australia and New Zealand Banking Group Limited (NZX: ANZ) is Australia's third largest banking as well as financial services groups, with current operations extending across Australia and offshore in NZ, East Asia and the Pacific Islands.

Financial Results for the H1 FY 2022

• ANZ announced statutory profit after tax for the half year ended 31 March 2022 of AUD3,530 Mn, reflecting a rise of 10% on the previous half. Its cash profit from continuing operations was AUD3,113 Mn, implying a fall of 3% when compared with the prior half.
• ANZ witnessed positive balance sheet growth in Australia due to improvements in home loan processing capacity.
• Also, robust home loan momentum in NZ has been delivering market share growth.
• ANZ’s Common Equity Tier 1 Ratio stood at 11.5% and cash return on equity was 10%.

Key Updates

• ANZ stated that Gerard Florian’s role has been expanded to include Group Services. Notably, he would be responsible for the design as well as governance of ANZ’s enterprise-wide business services. Also, Antony Strong would be joining Executive Committee as Group Executive Strategy and Transformation.
• ANZ announced the completion of the retail shortfall bookbuild under its fully underwritten pro-rata accelerated renounceable entitlement offer. Notably, the completion of the retail shortfall bookbuild wraps up the final stage of the entitlement offer under which ANZ garnered ~$3.5 Bn.

Outlook

ANZ stated that economic environment could be very different as well as it would continue to adjust the risk appetite, business settings as well as investment priorities. ANZ is witnessing higher demand from its business customers. It is well placed to continue to support them as they are managing in the world of high inflation and interest rates.

Key Risks

The ANZ Group’s activities are exposed to several risks including risks arising from the COVID-19 pandemic, that could adversely impact its business, operations, results of operations, reputation, prospects, etc.

Fundamental Valuation

Valuation Methodology: Price/BVPS Multiple Based Relative Valuation (Illustrative)

Stock Recommendation

There are risks to the domestic as well as global economic outlook from factors including higher inflation as well as interest rates. Moreover, ANZ is exposed to the risks arising from change in political as well as general business and economic conditions, including disruption in regional or global credit and capital markets.

The stock has been valued using Price/BVPS multiple-based illustrative relative valuation and the target price so arrived reflects a decline of low double-digit (in % terms). A slight discount has been applied to Price/BVPS Multiple (NTM) (Peer Average) considering the risks associated.

Considering the resistance and target level achievement, current trading levels and risks associated, it is prudent to book profits at the current levels. Hence, a ‘Sell’ rating has been provided on the stock at the current price of NZD28.63 per share as of 20 October 2022 (New Zealand Time: 1:49 PM (GMT +13)).

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for share price chart and stock valuation is based on October 20, 2022, and all other data such as stock price performance as of October 21, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

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