ANZ Capital Notes Issue March 2015

[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