The ANZ share price has soared 37% in 2 weeks. Here's why.

The ANZ share price has risen faser than other major banks in the past two weeks. At today's price is the bank still a good investment?

| More on:
city building with banking share prices, anz share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Australia and New Zealand Banking Group Limited (ASX: ANZ) share price has risen over 37% in the period since close of trading on Friday 22 May. This is the largest rise of all the four major banks. The larger National Australia Bank Ltd. (ASX: NAB) follows closely behind with a rise of just over 33% for the same period. 

Why are bank shares rising?

Across the world, it's starting to look like the economic fallout from COVID-19 could be less significant than originally anticipated. This is particularly the case in Australia. On 26 May, UBS analyst Jonathan Mott, a known market bear, raised his expectations of the banking sector. Jonathan pointed out the current underperformance of bank shares given the better than expected outlook. 

Many economic factors point to a recovery in bank performance. Not least of which was the $60 billion saving in JobKeeper due largely to clerical errors. An additional $10.6 billion in household spending power after early superannuation withdrawals and improvements in card and retail data are also contributing to optimism surrounding the sector. 

It remains to be seen what will happen in September when the government assistance comes to an end. Still, the share prices of all major banks have all been relatively slow to rise since the March low point. 

On 27 May, National Australia Bank announced it was increasing its capital raising to $4.25 billion, including an additional $1.25 billion for retail investors. This announcement appeared to carry the NAB share price higher along with the other major banks. 

Tier 1 capital fueling the ANZ share price rise

On 2 June, ANZ announced it had sold its New Zealand business UDC Finance for 1.2x tangible asset value. This will provide an additional ~$439 million of Tier 1 capital, or available cash from retained earnings, in this case. This saw the ANZ share price rise even further. 

In the ANZ chairman's report on 28 May, we learned that statutory profit after tax was down 51% for the first half of 2020. Accordingly, the board agreed to defer the decision on dividend payments. While this does not close the door on a dividend payment, it definitely reduces the certainty around whether it will eventuate. The chairman, David Gonski, acknowledged the value shareholders place on the regular payment of bank dividends and promised further information in August. 

Foolish takeaway

It appears that the bank share prices are starting to level up to pre-pandemic levels. However, the ANZ share price is still down 14.9% year to date. Based on its current price of $20.97 at the time of writing, it would still require an increase of nearly 30% to reach the levels we saw in February prior to the crash. I'm not sure how long it will take, but I am confident the ANZ share price will return to these former levels. 

Furthermore, ANZ's twelve month trailing dividend yield is 8.09%. This is a very healthy dividend payout. Nevertheless, it remains to be seen when or even if the banks will recommence dividend payouts at or near pre-pandemic levels. Though, I believe this is likely. 

In my view, it is the size and stability of the dividend payment that attracts fund managers and retail investors. 

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Happy man working on his laptop.
Share Market News

5 things to watch on the ASX 200 on Wednesday

Will the market return to form today? Let's find out.

Read more »

a young farmer stands back and admires his work in arranging bales of hay to form a house shape with two bales balancing against each other to form a roof, perched on bales tipped on their side in an abstract house shape on a freshly harvested paddock.
Best Shares

Top ASX shares to buy in November with the market near all-time highs

Our writers are still finding value in a record-breaking Australian share market.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors endured another day of selling this Tuesday.

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
52-Week Highs

12 non-bank ASX 200 shares smashing new 52-week highs today

Do you own any of these stocks at 52-week highs today?

Read more »

Man pointing at a blue rising share price graph.
Technology Shares

Guess which ASX 300 tech stock is already up 64% in November!

The ASX 300 tech stock is surging higher this month. But why?

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these stocks.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why ANZ, Block, Neuren, and Pilbara Minerals shares are pushing higher today

These shares are having a solid session on Tuesday. But why? Let's find out.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Endeavour, Global Data Centre, OFX, and Paladin Energy shares are dropping today

Why are these shares under pressure today? Let's find out.

Read more »