ANZ.NZX - Anyone holding?

[macduffy]

Those of you invested in ANZ shares, have you bought them on the ASX or NZX? Any benefits to choosing one over the other?

Any price difference gets arbitraged away quicker than the average investor can react so it really boils down to whether the available funds to purchase are NZD or AUD and the brokerage deal that one has with one's broker. The ASX market in ANZ is bigger, of course, but there is generally enough depth and activity in ANZ on the NZX for retail investors. Or so I have found over umpteen years!

Cheers.

PS. Cash dividends are paid to shareholders with an NZ address in NZD regardless of the ASX/NZX issue.

[kiwichick]

PS. Cash dividends are paid to shareholders with an NZ address in NZD regardless of the ASX/NZX issue.

That's good to know! Thanks.

[Snoopy]

PS. Cash dividends are paid to shareholders with an NZ address in NZD regardless of the ASX/NZX issue.

Well I hold ANZ shares on the New Zealand register. I get my dividends paid directly in $A into my Australian bank account. So I guess you can choose which currency you get your dividends paid in.

SNOOPY

.

[huxley]

Any price difference gets arbitraged away quicker than the average investor can react so it really boils down to whether the available funds to purchase are NZD or AUD and the brokerage deal that one has with one's broker. The ASX market in ANZ is bigger, of course, but there is generally enough depth and activity in ANZ on the NZX for retail investors. Or so I have found over umpteen years!

Cheers.

PS. Cash dividends are paid to shareholders with an NZ address in NZD regardless of the ASX/NZX issue.

Yeah I hold on both NZX & ASX - they pay dividends in either NZD, AUD or GBP depending where your account is (the DRP is in AUD).

[Snoopy]

Today I want to update the ANZ New Zealand banking covenants for September 30th 2015 quarter (corresponding to the EOFY). ANZ New Zealand includes their wholly owned subsidiary UDC finance.

Once again the document I am referencing is the:

"ANZ bank New Zealand Limited Annual Report and Disclosure Statement for the year ended 30th September 2015, Number 79 issued November 2015"

Page 49, note 28 contains the information on capital adequacy.

The information supplied is as follows:

Common Equity Tier 1 ratio: 10.5% (vs RBNZ minimum of 4.5% + 2.5% buffer)
Total Tier 1 ratio: 12.7% (vs RBNZ minimum of 6.0% + 2.5% buffer)
Total Tier 1 & 2 ratio: 13.6% (vs RBNZ minimum of 8.0% + 2.5% buffer)

The improvement in these ratios could have benefittted from the $3.2b capital raising by institutional placement and subsequent share purchase plan offer to shareholders made during the financial year. However the ANZ.NZ Tier 1 capital ratio has gone down in New Zealand over the year, and no new share capital injection is apparent from the accounts. Additional capital requirements recently announced by the Australian Prudential Regulation Authority (APRA), in particular the increase in average credit risk weights for major bank Australian mortgage portfolios to 25% taking effect from 1 July 2016. So it looks like all the capital raising monies were ear marked for Australia, and the ANZ.NZ subsidiary operations have not benefitted at all.

Instead, the ANZ New Zealand operation has been shored up by the issue of two new tranches of ANZ convertible notes.

• On 5 March 2015, the Bank issued 10.0 million convertible notes (ANZ NZ ICN) to the NZ Branch at NZ$100 each, raising NZ$1,003 million.
• On 31 March 2015, the Bank issued 500 million convertible notes (ANZ NZ CN) at NZ$1 each, raising NZ$500 million before issue costs.

Both of these issues are structured as additional Tier 1 capital for ANZ.NZ.

Page 50 contains detailed notes on just how the ANZ NZ capital is made up. If you use that information and use it to calculate the above ratios, based on a loan book with net loans and advances of $106,357m (from the balance sheet) I calculate the above ratios as follows (total net loans and advances of broken down under Note 12 'Net Loans & Advances'):

Common Equity Tier 1 ratio: $8,441m/$106,357m = 7.9%
Total Tier 1 ratio: $10,282m/$106,357m = 9.7%
Total Tier 1 & 2 ratio: $10,984m/$106,357m = 10.3%

Those figures are a different to those on the preceding referenced page. That is because the Tier 1 and Tier 2 capital figures have been 'risk adjusted' before they went into my calculation. The risk adjustment is done because the expected capital recovery from loans should they go bad is different among the different classes of loans (corporate, sovereign, bank, retail mortgages and other retail)

SNOOPY

PS Tabulated version of above results

	30/09/2015 (quote)	30/09/2015 (risk adj)	RBNZ Required
Common Equity Tier 1 Ratio	10.5	7.9	4.5+2.5
Total Tier 1 Ratio	12.7	9.7	6.0+2.5
Total Tier 1&2 Ratio	13.6	10.3	8.0+2.5

There has been talk on another thread about 'What is an adequate capital ratio for a bank?' On 17th September 2015, ANZ pocketed the proceeds of a capital raising to fix their own position. This capital raising was captured in the FY2015 Annual Report , with its 30th September 2015 balance date. So I think it is useful to look at a couple of key statistics before (FY2014 capital position ) and after (FY2015 capital position). That way we shareholders can see in numerical terms, what the changes were in the capital structure that ANZ managment deemed prudent.

All numbers quoted below are from the FY2015 ANZ Annual Report

	FY2014	FY2015	Reference
Normalised Profit (A)	$7,117m	$7,216m	p5
Shareholder Equity 'Tier 1 Capital' (B)	$49,284m	$57,353m	p62 (Balance Sheet)
Return on Equity (A)/(B)	14.4%	12.6%	calculated
Additional 'Tier 1 Capital' (C)	$6,004m	$7,423m	p101 (Subordinated Debt)
Total 'Tier 1 Capital' (B)+(C)	$55,288m	$64,776m	calculated
'Tier 2 Capital' Perpetual Subordinated Notes (D)	$1,087m	$1,188m	p101 (Subordinated Debt)
'Tier 2 Capital' Dated Subordinated Notes (E)	$6,516m	$8,398m	p101 (Subordinated Debt)
'Tier 2 Capital' Discount for near dated 2019 notes (F)	$0m	-$271m	calculated at 20%
'Tier 2 Capital' Total (D)+(E)+(F)	$7,603m	$9,315m	calculated
Total Capital (Tier+Tier2) (G)	$62,891m	$74,091m	calculated
Return on Total Capital (Tier+Tier2) (A)/(G)	11.3%	9.7%	calculated

That last line in the table is not one you will find in any ANZ report. Yet it is an interesting measure of how much 'equity', in the widest sense of that word, that ANZ management regard as prudent.

If, for a comparative example, you take the equivalent ROTC for New Zealand's own Heartland Bank: Net Profit $48.163m (excluding other comprehensive income) Shareholder Equity $480.125m
(for Heartland ROTC = ROE, because Heartland as yet has no subordinated bond type capital)

Then ROTC = $48.163m / $480.125m = 10.0%

This shows that the Heartland assets are being worked pretty hard. Is that just an indication of higher underlying profit margins at Heartland? Or are those Heartland assets being worked rather harder than is prudent?

SNOOPY

[percy]

So the out come of ANZ shoring up their capital is;
14.28% decline in ROE from 14.4% to 12.6% and
ROC has declined 14.16% from 11.3% to 9.7%.
Using Snoopy's figures.
So how much will ANZ's dividend reduce by.?
Yet NZ's only listed bank, is increasing both their ROE, and their dividend,and has excess capital that can be used for a further acquisition,or a return of capital to shareholders.!
As HBL shareholders know, HBL are finding very profitable niches for growth,ie Reverse Equity loans where the margins are higher than the household mortgages the Aussie banks compete for.
Establishing new on line platforms for customers ease,without having to establish high overhead branches.
More nimble,faster reacting,more growth prospects,yet with prudent practices.Staying more in tune with their customers.
Not being caught with risky sectors such as Australian mining ,Australian property market,Auckland property market,or a large exposure to dairying.
A lot safer better loan book spread.,

[Snow Leopard]

There has been talk on another thread...
...This shows that the Heartland assets are being worked pretty hard. Is that just an indication of higher underlying profit margins at Heartland? Or are those Heartland assets being worked rather harder than is prudent?

SNOOPY

Reading this is like watching your neighbour build a tree-house using rusty nails and rotten wood.

Then when he has finished being totally surprised that the entire tree falls over.

Best Wishes
Paper Tiger

[Snoopy]

Snoopy wrote:
"Heartland assets are being worked pretty hard. Is that just an indication of higher underlying profit margins at Heartland? Or are those Heartland assets being worked rather harder than is prudent?"

So the out come of ANZ shoring up their capital is;
1/ 14.28% decline in ROE from 14.4% to 12.6% and
2/ ROC has declined 14.16% from 11.3% to 9.7%.
Using Snoopy's figures.

So how much will ANZ's dividend reduce by?

Unknown, although ANZ has made a habit of not reducing dividends in the past.

Yet NZ's only listed bank, is increasing both their ROE, and their dividend,and has excess capital that can be used for a further acquisition,or a return of capital to shareholders.!
As HBL shareholders know, HBL are finding very profitable niches for growth,ie Reverse Equity loans where the margins are higher than the household mortgages the Aussie banks compete for.
Establishing new on line platforms for customers ease,without having to establish high overhead branches.
More nimble, faster reacting, more growth prospects, yet with prudent practices. Staying more in tune with their customers.
Not being caught with risky sectors such as Australian mining ,Australian property market, Auckland property market, or a large exposure to dairying.
A lot safer better loan book spread.,

A return on equity calculation, based on average shareholder equity for the year gives one measure of how well both HBL and ANZ are working their shareholder's funds:

{Note: I have added the impaired asset expense back into each company's earnings NPAT figures, to try and gain a more normalised picture of earnings.}

ANZ Group

($7,216m + 0.7($1,179m)) / (0.5 x($57,353m+$49,284m)) = 15.0%

Heartland Bank

($48.163m + 0.72($12.105m)) / (0.5 x($480.125m+$452.622m)) = 12.2%

By this measure then, it is the ANZ bank that is more efficient.

SNOOPY

[winner69]

Unknown, although ANZ has made a habit of not reducing dividends in the past.



A return on equity calculation, based on average shareholder equity for the year gives one measure of how well both HBL and ANZ are working their shareholder's funds:

{Note: I have added the impaired asset expense back into each company's earnings NPAT figures, to try and gain a more normalised picture of earnings.}

ANZ Group

($7,216m + 0.7($1,179m)) / (0.5 x($57,353m+$49,284m)) = 15.0%

Heartland Bank

($48.163m + 0.72($12.105m)) / (0.5 x($480.125m+$452.622m)) = 12.2%

By this measure then, it is the ANZ bank that is more efficient.

SNOOPY

Snoopy, more leveraged in my opinion

And Heartland seems to want to emulate them

[Snoopy]

Snoopy, more leveraged in my opinion

And Heartland seems to want to emulate them

You could say that ANZ is more leveraged than Heartland Winner. But what if you take into account all the Tier1 and Tier 2 'bond' type capital that ANZ has, and Heartland does not?

SNOOPY