Australia and New Zealand Banking Group (ASX: ANZ) is unique because it is the only big four bank seeking to significantly expand its presence throughout Asia.
However, as promising as its 'Super Regional Strategy' may appear, there are a number of reasons why now mightn't be the right time to add ANZ shares to your portfolio.
- We're at the wrong end of the bad debt cycle. Recent analysis from investment bank UBS found that the bad debts of Australian banks are currently sitting near 20-year lows. In recent years fewer bad debts have boosted profits for each of the big banks, but with the economy expected to hit a rough patch in 2015 it's important to remember why they're called bad debts.
- Valuation. Like each of its peers, ANZ's current valuation is eye-watering. Whilst falling interest rates may prompt more investors to buy-up big bank stocks, any rally from here will likely prove to be unsustainable given the headwinds facing the economy.
- Slowing economic growth. It's been around 20 something years since Australia had its last recession. Since then, Australia's economic growth has been unrivalled in the western world. The big banks benefitted from the housing and mining booms which followed more than anyone else. Whilst a recession is very unlikely, moving into 2015 the outlook for domestic growth is troublesome and credit growth is going to be harder to come by.
