Australia and New Zealand Banking Group (ASX: ANZ) dropped 5% yesterday, and has fallen 23% in the past six months. But today is the today to buy.
We all read the news yesterday here on the Motley Fool, where Ryan Newman reported that the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) crashed a shocking 4.1% by the close to trade at its lowest level for around two years. Ryan also reported that it was the worst single day performance since January 2009, just two months before the bottom of the GFC. The reason being, Chinese shares fell more than 7.5%. He calculated that close to $60 billion was wiped from the market's value.
Australia's big four banks have been hit particulary hard recently due to new capital issues and now the fall in the Chinese share market.
That's the bad news, now here's the good news.
Sharemarket crashes provide opportunites for investors who know what to look for.
That's why it's time to take another look at ANZ. ANZ is a bargain at $26.91 if you're prepared to be patient.
ANZ is one of Australia's four major banks by market value and the largest bank in New Zealand and the Pacific, it has a great brand, high switching costs, and cost advantages that give it a wide competitive moat.
There's a lot to like about ANZ if you can see through the red in the market from yesterday and focus on the future.
One look at its recent 2015 half-year report and you will see that its profits were up 3% to $3.5 billion, but what caught my eye was this line under International and Institutional Banking (IIB):
IIB increased profit by 7% with strong contributions from Global Markets customer sales and the Cash Management business along with ongoing benign credit outcomes. PBP increased by 1%. Geographically, Asia Pacific Europe and America (APEA) was the standout, with profit up 18%.
ANZ's strategy is to become a super-regional bank in Asia, with an objective to source 25% to 30% of revenue from outside of Australia and New Zealand by the end of fiscal 2017. This differentiates ANZ Bank from domestic peers, none of which has an Asia-centric strategy.
ANZ is well placed to take advantage of Australia's links with Asia, the fast-growing emerging market region, if you're prepared to be patient.
Other things to like about ANZ are:
- Earnings per share have been excellent over the past 5 years
- Return on equity has been outstanding, averaging 15%-16% since 2005
- It provides a dividend yield of 6.7% fully franked.
There is no doubt that ANZ's share price will bounce back, the only question is, "Will you buy it today, and enjoy the ride back up?"
