ANZ Earnings Gets Downgraded

Submitted by Jim Thesiger on 11 July, 2009 - 06:17

The estimated earnings of the Australia and New Zealand Banking Group (ANZ) was downgraded by the market analysts after the company declared that Joyce Phillips, the former banker of Citigroup is about to join the ANZ management board in the post of group managing director for innovation, marketing, acquisition and merger. It is believed that the downgrade was also motivated by the company’s recent move to raise $2.2 billion for its war chest.

At the same time when the company announced that it is going to raise a fund of $350 million from the retail investors Mike Smith, the chief executive of ANZ made a decision to accept the whole subscription. With this decision, ANZ is now set for an inflated tier one capital ratio of 9.5 percent. This is well in front of its big four peers following the redemption of hybrid capital of $1 billion.

Though ANZ have spent $1 billion on select Royal Bank of Scotland equities, it was assumed by an analyst that the company is sitting on an excess capital of $3 billion, working off the 8 percent benchmark for tier one capital which was earlier accepted. However, issuing such a huge amount of new shares will lower the earning per share for the company.

Jarrod Martin, the analyst of Royal Bank of Scotland stated that he is not expecting the additional acquisitions to strengthen up the earning per share before 2011-2012 considering the present regulatory hurdles and assets. In a statement on Thursday, ANZ mentioned that based on the additional capital the company will gain more flexibility to utilize the opportunities of organic and strategic growth. The company also claimed that it is ready to carry more capital amid the present economic uncertainty. The ANZ shares have seen a rise of 18 cents on Friday taking the stock price to $16.03 recovering from its Thursday’s position where it fell for 45 cents as the price dropped to $15.85.