ANZ vs WBC

[winner69]

Especially as they're both at 26.00 !

But no imputation credit.

P told Gonzo 'don't do it' .... and both a re now just over $22

CBA got a muted response from a $6b profit ... these still to report ... and the world not a happy place for punters at the moment .... so P advice at $22+ to gonzo would still be 'don't do it' .... probably

Interesting times for the aussie banks

[winner69]

Even though both ANZ and WBC shareprice lower than when gonzo first posted the latest earnings announcements point to ANZ being the better medium to long term bet

[sharer]

Even though both ANZ and WBC shareprice lower than when gonzo first posted the latest earnings announcements point to ANZ being the better medium to long term bet

Agree, in my case because i hope their longer term strategy to expand in asia will succeed.

[Snoopy]

Interesting times for the aussie banks

A further comparison on the two NZX listed Aussie Banks.

Figures represent all of the respective ANZ and WBC businesses and dollar amounts are $A.

ANZ
	Annual Impaired Asset Expense (A)	Total Impaired Asset Provision (B)	(A)/(B)	Net Receivables (impairment included)	(B)/(C)	EBT (before impaired asset exposure)	(A)/(D)
2011	$1,237m	$3,646m	34%	$400,953m	0.9%	$8,909m	13.9%
2012	$1,198m	$4,538m	26%	$432,361m	1.0%	$9,192m	13%
2013	$1,188m	$4,354m	27%	$487,618m	0.9%	$10,265	11.6%
2014	$986m	$3,933m	25%	$525,685m	0.7%	$11,294m	8.7%
2015	$1,179m	$4,017m	29%	$574,255m	0.7%	$11,712m	10.1%

WBC
	Annual Impaired Asset Expense (A)	Total Impaired Asset Provision (B)	(A)/(B)	Net Receivables (impairment included)	(B)/(C)	EBT (before impaired asset exposure)	(A)/(D)
2011	$993m	$4,414m	22%	$501,023m	0.9%	$9,507m	10.4%
2012	$1,212m	$4,241m	29%	$518,686m	0.8%	$10,026m	12.0%
2013	$847m	$3,949m	21%	$540,113m	0.7%	$10,619	8.0%
2014	$650m	$3,481m	19%	$588,824m	0.6%	$11,400m	5.7%
2015	$753m	$3,332m	23%	$626,648m	0.5%	$12,109m	6.2%

And just for good measure, I will throw in the equivalent table for Heartland bank, even though that bank is not strictly comparable.

Heartland Bank
	Annual Impaired Asset Expense (A)	Total Impaired Asset Provision (B)	(A)/(B)	Net Receivables (impairment included)	(B)/(C)	EBT (before impaired asset exposure)	(A)/(D)
2012	$5.642m	$27.426m	21%	$2,105.702m	1.3%	$29.337m	19%
2013	$22.527m	$50.491m	45%	$2,060.867m	2.4%	$36.540	62%
2014	$5.895m	$16.381m	36%	$2,623.767m	0.6%	$57.416m	10%
2015	$12.105m	$25.412m	48%	$2,887.482m	0.9%	$76.304m	16%

Points I note.

1/ Westpac have significantly lower impaired receivables, compared to total receivables. Furthermore Westpac is experiencing a steady reduction in the annual impairment balance sheet disclosure that the others are not experiencing.

2/ Heartland have a significantly higher annual impairment charge, relative to the total balance sheet annual impairment provision. A function of operating in a riskier loan space?

3/ ANZs write offs with respect to earnings are rather greater than Westpacs.

SNOOPY

[h2so4]

Good news from ABC news today. So far this reporting season Aussie banks haven't been increasing their bad debt provisions. Those bankers are not stupid probably realise they overdid it a tad.

[Snoopy]

The following division of loans is how the ANZ bank in Australia segments them. Loan categories from other banks have been adjusted in some instances to fit into this ANZ model.

Loan Category	ANZ Loan Book FY2015 (gross)	ANZ Loan Book FY2015 (%ge)	WBC Loan Book FY2015 (gross)	WBC Loan Book FY2015 (%ge)	HBL Loan Book FY2015 (gross)	HBL Loan Book FY2015 (%ge)
Agriculture, Forestry, Fishing and Mining	$39,610m	4.7%	$22,671m	2.9%	$576.577m	17.8%
Business and Property Services	$51,000m	6.1%	$74,793m	9.7%	$396.939m	12.2%
Construction	$7,609m	0.9%	$7,682m	1.0%
Entertainment, Leisure and Tourism	$11,797m	1.4%	$8,416m	1.1%
Finance and insurance	$230,710m	27.5%	$95,694m	12.4%	$377.318m	11.6%
Government and Local Authority	$52,524	6.2%	$75,936m	9.9%
Manufacturing	$34,432m	4.1%	$18,501m	2.4%	$93.779m	2.9%
Personal lending	$330,925m	39.5%	$419,764m	54.5%	$1,397.003m	43.1%
Electricity, Gas and Water Supplies	$9,795m	1.2%	$7,445m	1.0%
Retail & Wholesale trade	$38,528m	4.6%	$22,774m	3.0%	$276.527m	8.5%
Transport and storage	$14,783m	1.8%	$13,895m	1.8%	$20.068m	0.6%
Other	$16,455m	2.0%	$2,358m	0.3%	$102.317m	3.2%
Total	$838,248m	100%	$769,929m	100%	$3,240.468m	100%

OK I have included Heartland because I know it has quite a few fans out there. It isn't really comparable as the loan bbok is less than 1/200th the size of ANZ or WBC. However, one thing to note is that in primary sector lending (agriculture, forestry, fishing and mining), in relative terms, the exposure of Heartland is five times that of a big Ozzie bank.
So accordingly Heartland is much more exposed to a primary sector downturn than the other two.

On page 11 of the WBC annual report this quote appears:

"Westpac has been underweight in the mining and mining services sector for some time."

The ANZ 'primary sector' exposure is significantly greater than WBC (4.7% vs 2.9%). But to say ANZ is 'overexposed' to mining and agriculture might be calling things too far. If anything ANZ are 'overexposed' to finance and insurance. A big chunk of that exposure (not shown on the table) is 'overseas' (which means outside of Australia and New Zealand in this context). Another bias in the ANZ Asian expansion is that Asian manufacturing loans outgross loans to Australian and New Zealand manufacturers combined. OTOH personal lending by ANZ is relatively much less in Asia.

From a Westpac perspective they are more into property and business loans, and also personal loans than ANZ.

What we have here between ANZ and WBC is two broadly similar companies, but with enough difference in emphasis to ensure that ANZ vs WBC is not quite the apples with apples comparison that some might think.

SNOOPY

[limmy]

WBC has a good earnings record.

[macduffy]

WBC has a good earnings record.

Yes, apart from that period in the late 80's/early 90's? when it looked for a while that they might have to be rescued by a takeover. A lot of very cheap rights around in the subsequent renounceable rights issue!

[Joshuatree]

Moodys have dropped 4 of 5 Aus banks from stable to negative outlook.Rating stayed the same ."expectation of a more challenging environment for the remainder of 2016 and beyond which could lead to a deterioration in their profit growth and asset quality etc.

Will the cost of lending go up and be passed on?

[Beagle]

Yes much like other banks here, good customers will be asked to fund sometimes reckless decisions banks have made chasing profit growth on some of their more risky lending.