The Australia and New Zealand Banking Group (ASX: ANZ) share price has edged lower in early trade after announcing the completion of its share buyback.
According to the release, ANZ has completed the $3 billion on-market share buy-back with 108.7 million ordinary shares purchased under the program that commenced in January 2018. This equates to approximately a 3.7% reduction in ordinary shares on issue.
The bank has undertaken this sizeable purchase of shares and still sits comfortably above APRA's stated unquestionably strong capital requirement of 10.5%. At its last update, ANZ's reported Level 2 Common Equity Tier 1 capital (CET1) ratio was 11.3%.
And this CET1 ratio is about to get a boost in the coming months with management confirming that the sale of the Australian Life Insurance business to Zurich remains scheduled to complete in late May.
ANZ's chief financial officer, Michelle Jablko, appeared to be very pleased with the strength of the bank's capital position.
She said: "Capital efficiency and a strong balance sheet have been key areas of focus in recent years. Since 2016 we have built the Group's CET1 from 9.4% to 11.3% and have been the only major bank to reduce shares on issue."
Jablko also advised that the bank will consider further capital management once the Australian Life Insurance business sale completes.
She added: "Once the funds are received from the Life Insurance sale, any further capital management will take into account several factors including actual and potential regulatory capital requirements as well as ongoing business needs."
Should you invest?
Whilst the banking sector is an incredibly difficult place to operate at present due to weakening consumer and business confidence and the housing market downturn, I still feel that ANZ's shares are a good option for investors that have limited exposure to the banking sector.
This is due to its strong capital position, generous dividend yield, and attractive valuation.
Overall, I would choose ANZ just ahead of National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) at this stage.
