ANZ Capital Notes Issue March 2015

[winner69]

As the article said - ........focus is very much on protecting the banks. Not their investors.


No doubt Heartland will come up with something similar as well

[BIRMANBOY]

That's amazing... wish I had your astounding abilities. "You don't have the time but yet it seems obvious"...(wow) The market decline is due to questions about asset quality (to me it looks like the market is declining in many places so how do you know its due to a specific item such as asset quality) Wow again. Holders are all silly...wow, wow wow. Sure some of us are but ALL of us...ok I guess if you say so..must be right. I retire suitably rebuked and humbled by your superior abilities. However always finish on a positive said my mum...so appreciate your comments and thanks for your wishing us good luck.

I haven't got the time like Snoopy does but it seems quite obvious from ANZ's significantly more serious decline in SP relative to the other Australasian banks the market is concerned by questions about their asset quality. If people are silly enough to continue to hold these capital instruments when they could book a capital gain and get out then good luck to them.
I was actually thinking Dire Straits...Money for Nothing and..well you know the rest of the title, probably too sexist in these politically correct days.

[Snow Leopard]

That's amazing... wish I had your astounding abilities...

He is very good at knowing when the market is being rational (selling down Australia New Zealand Bank) and being irrational (selling down Air New Zealand).

Best Wishes
Paper Tiger
(Member of the DNRC)

[Beagle]

But this old dog has been right about HBL and maybe, just maybe he knows a fair bit about these unsecured capital bonds. When it hits the fan you want to be at the front of the queue eating what's there first not the back accepting any mopped up mess you're offered. The Credit Sails issue promised great unsecured returns too and some of us remember how that ended.

A few months back I called the top on MTFHC's at 76, now 68 and no real depth on the buy side. Does it really make the cat's skim milk go so sour when I'm right again.
What did your mother say about sarcasm BB...

[BIRMANBOY]

You obviously have a need to be top dog and generally regarded as Guru material Roger. Those days are gone for me...my testosterone, along with Elvis, has got up and left the building. I, along with probably many posters, look at shares and the share market as competition to compete with the financial system and to try and eke out a few more % points than what is offered at the bank. We don't look at this as being a competition among other investors. I'm happy for your wins and learn from your losses whomever you are. However when critiques are penned it is always wise to phrase them in non derogatory terms and with a softness as opposed to "you're an idiot for doing whatever".' That's just rude and to be blunt a little arrogant. I'm sure that's not the case but that's the way it comes across. You were dismissive of my request for some information to back up your claim saying "I don't have time". Ok that's fine but that then poses the question why did you post in the first place. Surely it makes sense to have some basis and facts before making a dismissive post. At a primitive, human level, we all have made decisions on what to invest in. It should be obvious that criticism needs to be well founded and robust to be accepted. Poorly researched or unfounded criticism runs the risk of being questioned, as it should be. Your example of Credit Sales although somewhat relevant is like comparing apples and oranges.....ANZ is a much larger, stronger entity. So I stand by my assertion that (A) the SP has bugger all to do with ANZ ability to withstand pressure and (B) that your claim of MASSIVE issues with dairy and mining is just gross exaggeration. However I will watch developments and keep an eye on what is happening...and refrain from making any statements until something actually happens. (As opposed to speculation and guesswork.)

But this old dog has been right about HBL and maybe, just maybe he knows a fair bit about these unsecured capital bonds. When it hits the fan you want to be at the front of the queue eating what's there first not the back accepting any mopped up mess you're offered. The Credit Sails issue promised great unsecured returns too and some of us remember how that ended.

A few months back I called the top on MTFHC's at 76, now 68 and no real depth on the buy side. Does it really make the cat's skim milk go so sour when I'm right again.
What did your mother say about sarcasm BB...

[Beagle]

I just call it as I see it BB, never been known for my political correctness and probably never will be. A question you might want to ask yourself after reviewing the SP graph's of the major Australian banks, is why has the ANZ been smacked down a lot harder than the rest of them ? Percy reckons they have the biggest exposure to the Dairy industry and from what I've read elsewhere this seems to be right, (sorry haven't got time to post supportive links but surely you can do some background reading ?) I have seen first hand the carnage these sort of unsecured deeply subordinated instruments have inflicted upon investors first hand during the GFC, that's why I find the terms of them so abhorrent. The other thing is that in a recent article on interest.co.nz the comment was made that about 90% of investors don't understand the implications of the Reserve Bank's open bank resolution and its implications for investors in banks. Sorry but I felt it was worth some more airing on here to help others understand the risks...I am sure not everyone is such a well informed investor as you or I. The risk of loss is small as is the chance of the ANZ invoking any of their "escape clauses" so eloquently written into the fine print of this instrument but in the context of what is starting to look like a pretty serious correction in international banking stocks I thought this was worth some more bandwidth.

I am sure many will be very happy to receive their 7.2% coupon. The odds are they will continue to receive same and all will be well. As Winner suggested earlier, if the ANZ have to invoke some of their clauses or RBNZ invoke the provisions of the open banking resolution there will be so many other problems going on nobody will even notice $500m being compromised so I shall crawl back into my kennel and wonder why I bothered barking in the first place.

[macduffy]

A question you might want to ask yourself after reviewing the SP graph's of the major Australian banks, is why has the ANZ been smacked down a lot harder than the rest of them ?

The reason seems to be ANZ's higher exposure to Asian markets - now seemingly downplayed since the retirement of CEO Mike Smith and China's slowdown. New management have specifically revoked the previously ambitious target for Asian earnings. Dairy exposure, while significant to the NZ business is much less so in the ANZ Group lending portfolio.

[Snoopy]

A question you might want to ask yourself after reviewing the SP graph's of the major Australian banks, is why has the ANZ been smacked down a lot harder than the rest of them ? Percy reckons they have the biggest exposure to the Dairy industry and from what I've read elsewhere this seems to be right, (sorry haven't got time to post supportive links but surely you can do some background reading ?)

The reason seems to be ANZ's higher exposure to Asian markets - now seemingly downplayed since the retirement of CEO Mike Smith and China's slowdown. New management have specifically revoked the previously ambitious target for Asian earnings. Dairy exposure, while significant to the NZ business is much less so in the ANZ Group lending portfolio.

Having skin in the game (being an ANZ shareholder) gives a strong incentive to check out the facts. So I have done just that.

Loan Category	ANZ Loan Book FY2015 (gross)	ANZ Loan Book FY2015 (%ge)	ANZ 'Overseas' Loan Book FY2015 (gross)	ANZ 'Overseas' Loan Book FY2015 (%ge)
Agriculture, Forestry, Fishing and Mining	$39,610m	4.7%	$5,965m	3.2%
Business and Property Services	$51,000m	6.1%	$6,969m	3.8%
Construction	$7,609m	0.9%	$767m	0.4%
Entertainment, Leisure and Tourism	$11,797m	1.4%	$1,438m	0.8%
Finance and insurance	$230,710m	27.5%	$98,337m	53.2%
Government and Local Authority	$52,524	6.2%	$8.854m	4.8%
Manufacturing	$34,432m	4.1%	$20,332m	11.0%
Personal lending	$330,925m	39.5%	$13,246m	7.2%
Electricity, Gas and Water Supplies	$9,795m	1.2%	$3,774m	2.0%
Retail & Wholesale trade	$38,528m	4.6%	$15,460m	8.4%
Transport and storage	$14,783m	1.8%	$4,984m	2.7%
Other	$16,455m	2.0%	$4,476m	2.4%
Total	$838,248m	100%	$184,602m	100%

The ANZ loan exposure to Asian markets is therefore:

$184,602m/$838,248m = 22.0%

By way of comparison the equivalent figure for Westpac, who do not have a specific push into Asia is just 3%. So the facts back up your suggestion Macduffy.

Now moving onto Rogers point, ANZ as an Australian entity does not disclose a separate exposure for Agriculture. Agriculture loans are lumped in with Forestry Fishing and Mining. The above figure in the table is 4.7%. As a reference the equivalent figure for Westpac (who claim to be underweight mining) is only 2.9%. So ANZ has nearly twice the exposure to Agriculture, Forestry Fishing and Mining as Westpac does. This means that Roger is probably correct as well.

In this instance, with both Macduffy and Roger likely being correct in their views, any mark down in the value of ANZ is probably a result of pressure from both angles.

SNOOPY

[tim23]

Thinking of switching from these to the ordinary shares - anyone else done this or considering?

[kiwitrev]

Great opportunity to load up on this bond if you believe no big sell off in global markets. Current sellers showing a bit of desperation below 102 for a bond yielding 7.2% in an ever decreasing interest rate environment.