ANZ Banking Group

Here is an Australian banking sector update from Australian market analyst UBS.

Labor Govt keeps the Four Pillars Policy

Rudd Government is committed to the four pillars policy:

Australian Banking Sector Update provided by Australian stockmarket analyst Macquarie Research Equities.

Banking Sector Revisited

St George Bank (SGB) has a price target of $34.00 from sharemarket analyst Macquarie Research Equities.

St George Bank (SGB) What could the other banks pay?

WBC looks well positioned with SGB Board support:

Given the SGB Board's support for its 1.31 for 1 bid (subject to no superior proposals being made), WBC appears to be well positioned. As a result, we believe a counter-bid would need to be at least 5-10% higher than WBC's proposal in order to win the SGB Board's support. This leads to two key questions.

National Australia Bank (NAB) has a particularly strong result in cost control and therefore an excellent operating performance from stockmarket analyst Macquarie Research Equities.

National Australia Bank (NAB): Dividend Yield Play – 10 Days to Go!

t’s bank dividend season again, and NAB follows ANZ and WBC this year with a $0.97 fully franked dividend, going ex-div on Friday 30th May. If you are looking for a high dividend trade, the following Dividend Yield Play strategy for the upcoming NAB dividend could be an interesting trade idea. .

ANZ Banking Group (ANZ) has a Buy 1 shares recommendation and a price target of $33 per share from stock analyst UBS. UBS has observed that the banking group has released a solid trading update and that ANZ is on track to hit targets in 2007; the bank remains the analyst's preferred Play in the Banking sector. The ANZ 1Q07 Trading Update stated that: (1) Revenue growth is "particularly strong" at the top end of its 7-10% target (2) Costs are tracking to the top of its 5-7% band given investment (3) Underlying margin fall in line with 2H06 (-3bp) (4) Asset quality is strong (5) BDD will be higher given mix changes, less recoveries & lower oil release (6) NZD hedge, Stuct Fin run-off & higher tax to reduce EPS by 2%. Personal lending is continuing to "perform strongly" especially in deposits with good volume growth & better margins and is continuing to be the growth driver. Mortgages are being held back by margin pressure and Cash-90 spread. Cards are doing well but is held back by BDD. Institutional is also seeing solid revenue growth (in line with Group targets). Business Banking is doing well after a tougher 2006. NZ expects rev growth 7-9% driving earnings Trading Statement was broadly in line with the analyst's forecasts (FY07E EPS growth of 12.7%), which remain unchanged. We would expect to see only minor changes to consensus forecasts following this update. The analyst thinks that the stock is inexpensive at 5% sector discount, best 3 yr forecast EPSg. Positives for ANZ identified by UBS: (1) retail banking div'n growing 15%+ p.a (2) good execution (3) capex spend above peers (4) earnings upside risk.

ANZ Banking Group (ANZ) is Australia's third largest bank and held its trading update this morning, providing not only an update on the first four months of trading, but also on expectations for the 2007 financial year. The bank announced that expectations for the 2007 financial year were in line with previous forecasts. Stock analyst Macquarie Research Equities (MRE) said that there were no real surprises, with commentary confirming 1H07 revenue growth is tracking towards the upper end of the expanded target range of 7-10% and expense growth is also in line with original expectations towards the upper end of the 5-7% target range. MRE said that today's update confirmed ANZ’s second spot on their list of preferences for the major banks. Personal Division continues to perform strongly. ANZ highlighted Personal continues to perform well with deposits strong in terms of both growth and higher margins, reflecting no doubt the benefit of the August and November rate rises. Comments on mortgages were as expected with good growth partly offset by increased margin compression, while Esanda continues to rebound post management changes last year. While the analyst expect Personal to deliver at least 13% YoY revenue growth in 1H07, the market could be surprised by the extent of slowdown in sequential growth in 1H07, though this reflects more the extremely strong growth of 2H06 and seasonality. New Zealand and Institutional performing within expectations. The NZ operations are performing well in terms of pre-provision profit growth with the Retail bank continuing to grow revenue in the 7-9% range. While MRE expect revenue growth is at the low end of this range, this is a good performance in the NZ market. Institutional performance has improved on 2H06 with revenue growth for FY07 "expected to be comfortably within ANZ's target range for the full year". Key drivers remain corporate & structured finance and markets.

Loan loss charges expected to be significantly higher but perhaps not as high as ANZ's initial expectations. Comments around bad debt provisions were in line with MRE’s expectations with higher losses expected in FY07 reflecting mix changes in cards, more normal corporate losses and a higher collective provision charge. However, ANZ's comments that corporate losses are not yet at the level forecast for the year as a whole suggest the overall charge is likely to be running a little below their initial expectations. This isn't a surprise given MRE's view that ANZ's expectations were likely to be above the markets’. This commentary does not change the analyst's view that FY07 BDD charge is likely to be a little above market expectations, it merely reinforces the 2H bias to the charge MRE have already assumed. That said, today's commentary may not be sufficient for those at the lower end of BDD forecasts to raise them.

ANZ remains MRE's second preference in the sector given strong revenue and pre-provision profit growth and better sustainability given consistently high investment. That said, with the stock having rallied to a 2% discount, MRE's view would be to buy on weakness in what is now a very narrowly priced sector.

ANZ Banking Group (ANZ) have a Buy 1 share trading recommendation and a price target of $33 from analyst UBS. The analyst have observed that ANZ announced a cash takeover offer for E*TRADE, @ $4.05 a share, valuing E*TRADE at $407m buying the remaining 65.8%. ANZ currently owns 34.2%, $22m BV vs $140m implied from offer. The offer price is a 9.5% premium to Fri close of $3.70 & a 17% premium to last months VWAP. The deal will be funded by excess capital (mostly T1 deduction) & not expected to hinder potential Asian acquisitions. Deal subject to 90% shareholder approval. E*TRADE will provide ANZ access to its growing customer base (with acceleration likely to increase post-acquisition) & also enhance ANZ's packaged WM offering. The Bank has indicated the deal is likely to be EPS neutral by 2008. The analyst see this bolt-on acqn as positive but unlikely to be material to earnings. ANZ is continuing to invest in front line distribution, with plans to increase branches by 40 in 07 & 08. The Bank's recent Asian investments should provide earnings momentum in the LT. The analyst believe continued re-investment & revenue in the retail bank will drive rev g'wth c9% in 07. The analyst thinks that the stock is inexpensive at 6% sector discount, EPS growth +11%. They find that the positives of the ANZ banking group as: (1) retail banking div'n growing 15%+ p.a (2) good execution (3) capex spend above peers (4) earnings upside risk.

Meanwhile, the ANZ Banking Group (ANZ) remains Macquarie Research Equities' (MRE) second pick in the banking sector behind CBA. MRE have commented that "ANZ's continuing strong retail banking revenue growth may become more attractive given disappointing retail banking revenue growth from CBA and stronger underlying margin pressure in the sector." The analystr has observed that "ANZ shares yesterday began the day suspended from trading following the bank announcing a cash takeover of the remaining 65.8% of E*TRADE Australia (ETR) that it does not currently own. The offer of $4.05 values the stake at $268m. The shares resumed trading with a flurry of activity at 11am, and steadily gained in price for most of the day. The shares closed up 2%. Acquisition makes sense long-term but is small and the timing is arguably several years late. The acquisition makes sense on a long-term view given the expanded exposure it provides ANZ to growth in retail financial services, the additional distribution it provides its institutional arm and the fact ANZ accounts for roughly a third of ETR's customer base through the strategic alliance formed with ETR in 1999. While recognising these factors, the deal is small with ETR's earnings just 0.5% of ANZ's. Further, the timing is interesting, coming four years into a bull market – will this continue the sector's historical record of buying sharebroking businesses at the top of the market. With ANZ customers representing roughly a third of ETR’s client base and the bank itself the largest shareholder in ETR at 34%, the prospect of an alternative offer appears slim. The $268m cash offer will have ~10bp capital impact on ANZ's ACE ratio. While it is possible APRA could require this deduction to be reported in the March results (which would drive a reported ACE ~4.3%), the deduction is more likely when the transaction completes in 2H07. The 10bp ACE impact should be adequately absorbed by ANZ's organic capital generated in the 2H, which would bring our forecast ACE ratio at September 2007 down to 4.44%. This is slightly below the 4.5% mid-point of ANZ's operating target range and at the low end of its major bank peers. ETR acquisition EPS neutral in FY08. For all intents and purposes the deal should be broadly EPS neutral in FY08 as suggested by ANZ. For example, based on current market forecasts, the deal would be accretive by $2m."

ANZ Banking Group (ANZ) shares have a Buy 1 share trading recommendation and a price target of $33 from stock analyst UBS. UBS reckons the price is cheap at the moment and it's time to grab their shares while you can. They expect ANZ's Retail momentum to continue in FY07E, with sector leading Retail rev g of 16%. Significant investment in the front line should continue ANZ's "lagging waves of growth". We f'cast 07E EPS g of 11.9%, c 2% above consensus. ANZ is investing c17% of its cost base back in to the Bank. We believe flexibility to invest today will provide ANZ with a rev advantage rel to Peers in the future. ANZ has guided to cost g 5-7% to improve mkt share & drive Group rev g 7-10% (a goal also set for the NZ div). The analyst expect a (+)ve March 2nd trading update, highlighting: (1) good business vol's, (2) continued retail momentum & (3) benign NPL's. This may be slightly offset by an increase in BDD charges post-normalisation of write-backs that held BDD down in 06. We est c16bps of loans & adv in 1H07E. Forex is also expected to place a slight drag on rev, c1% due to rev hedging in the NZD & USD. They believe ANZ is cheap at an 8% sector discount. The share analyst finds the following positives for ANZ: (1) Retail banking division growth +15%, with ongoing upside (2) overweight WA, underweight NSW (3) good execution (4) solid investment spend. Risks: (1) CEO uncertainty (2) Asian investments a price to book drag.

ANZ bank (ANZ) has been in a long term trading channel since mid 2004 although recently the share price has bounced back from recent highs above $28 to around $26 in the recent "market correction" (View long term chart). Trade volume spiked in the sharp downturn during May 2006 and the MACD indicates the stock is oversold. Macquarie Research Equities (MRE) indicate that ANZ bank is their number one pick of the major banks in this moment of time.