ANZ.NZX - Anyone holding?

[tim23]

There was a pretty good opportunity about April last year I swapped my Anz bonds for ords paid $24.50 thats about 40% plus 2 decent dividends as well.

[Biscuit]

15.7% return for 2016. Not too bad, eh, Biscuit?

http://www.theage.com.au/business/ba...08-gto0xz.html

Doing well now it's led by a kiwi eh? I always liked the idea of a "super-regional bank" and the push into asia. It never really got traction but was a point of difference.

[Snoopy]

My average buy in was around $20, but that was back in 2009 so pretty crappy investment really. They did well initially I think but gone nowhere for a few years now.

You might want to reconsider your position Biscuit.

Looking at historical figures on yahoo, ANZ was trading at around $NZ20 per share in June/July 2009. Closing price now is arond $NZ33. Checking back on my dividend records I think you have received a total of $A11.25 in dividends over the seven year you have held, lets say $NZ12 gross or $NZ8.4 net. From my rough calculations you have more than doubled your money (after tax) over seven years. Given all the turbulance in Australian markets of late, I would suggest that what you have here is an outstanding investment result, almost certainly in the upper quartile of the buy and hold investment universe. Far from 'going nowhere', ANZ was of the best investments you could have possibly made over that period. You have nothing to feel sorry about.

SNOOPY

[Biscuit]

You might want to reconsider your position Biscuit.

Looking at historical figures on yahoo, ANZ was trading at around $NZ20 per share in June/July 2009. Closing price now is arond $NZ33. Checking back on my dividend records I think you have received a total of $A11.25 in dividends over the seven year you have held, lets say $NZ12 gross or $NZ8.4 net. From my calculations you have more than doubled your money over seven years. Given all the turbulance in Australian markets of late, I would suggest that what you have here is an outstanding investment result, almost certainly in the upper quartile of the buy and hold investment universe. Far from 'going nowhere', ANZ was of the best investments you could have possibly made over that period. You have nothing to feel sorry about.

SNOOPY

Yes, I will admit that of the shares I bought in 2009 and still hold, ANZ is certainly not the worst (that title belongs to AMP - the only reason I have not sold is because I bought in with one of my sons, so I have not got around to sorting that out - pretty lame excuse). ANZ was a screaming buy in 2009 and I think is still a reasonable hold today. Many shares were a screaming buy back then though, and many have done a lot better than ANZ. But yes, I do not regret buying ANZ.

[Snoopy]

Yes, I will admit that of the shares I bought in 2009 and still hold, ANZ is certainly not the worst (that title belongs to AMP - the only reason I have not sold is because I bought in with one of my sons, so I have not got around to sorting that out - pretty lame excuse). ANZ was a screaming buy in 2009 and I think is still a reasonable hold today. Many shares were a screaming buy back then though, and many have done a lot better than ANZ. But yes, I do not regret buying ANZ.

I would suggest to you that given the company risk profile, ANZ being a quasi boring utility, there isn't a single share that has done better than ANZ. Yes of course some others have done better in a 'looking back with the benefit of hindsight' way. But these are liable to be much riskier smaller players that had peer group shares that crashed over the same time period. I put it to you that in a risk adjusted way, ANZ is actually the best share in your portfolio, full stop! If you had put all of your share investment capital in ANZ in 2009, and done nothing in the intervening period, then you would have more capital today than you actually do now!

SNOOPY

[macduffy]

ANZ being a quasi boring utility

Really? I'm sure that WBC shareholders didn't feel that they had one in the early 90's when WBC shares were marked below $5 and there was real concern about the future of the bank!

[Biscuit]

I would suggest to you that given the company risk profile, ANZ being a quasi boring utility, there isn't a single share that has done better than ANZ. Yes of course some others have done better in a 'looking back with the benefit of hindsight' way. But these are liable to be much riskier smaller players that had peer group shares that crashed over the same time period. I put it to you that in a risk adjusted way, ANZ is actually the best share in your portfolio, full stop! If you had put all of your share investment capital in ANZ in 2009, and done nothing in the intervening period, then you would have more capital today than you actually do now!

SNOOPY

The other boring utility I bought in 2009 and still hold was CEN, which is still down 20% even with dividend reinvestment (which means it is actually worse performing than my AMP shares). But I doubt I would have more capital in my share portfolio if I had put it all into ANZ because of course I have not held most of my 2009 shares continuously but have bought and sold many times which has been more profitable. I guess it does show that I have never considered ANZ to be seriously overvalued in that time. But then I have never considered CEN to be overvalued either (which was also a mistake).

[Snoopy]

Really? I'm sure that WBC shareholders didn't feel that they had one in the early 90's when WBC shares were marked below $5 and there was real concern about the future of the bank!

I said 'quasi utility' in that like a power connection and a phone connection and a roof over your head, every 21st century citizen must have a bank account. ANZ, like WBC, is part of the Australian Government 'four pillars' banking policy. I can't remember all the details of WBCs early 90s situation. But I think there was an implicit guarantee that the government woudl bail deposit holders out. That didn't help WBC shareholders at the time of course. But I don't think that even in the market's darkest days, there was ever a prospect that one of the four main Ozzie banks would close up. 'Too big to fail' being the classic Australian term.

SNOOPY

[Snoopy]

All good stuff, Snoopy, but carefull that you don't miss the wood for the trees here. Well and good to analyse accounts of ANZ NZ and UDC but remember that the investment here is in ANZ Group - despite being listed on the NZX - and that NZ accounts for around 14.75% of group income these days.

Yes quite right to remind ANZ shareholders that UDC is really a minnow within a minnow as far as the ANZ parent in Australia is concerned. But I do think that the UDC position is particularly interesting, given that it is up for sale and ANZ can arrange the books at UDC however they see fit. Perhaps the biggest surprise is that putting FY2015 and FY2016 industry sector leding side by side, there is very little proportional change (taking into account the growth in the UDC loan book). But take note of the detail given in note 9 of the UDC financial report 2016 on UDC borrowings.

"The interest rate on the committed credit facility at 30 September 2016 was 3.07% (30 September 2015 3.95%). The current credit facility expires on 28 September 2018. The company can extend the terms of the credit facility subject to arrangement to ANZ bank NZ.

The amount of the committed facility was increased to $1,800m on 24th November 2016."

All this smells to me like UDC is being primed for sale. A 3.07% interest rate for a company operating in the risky end of the loan market? 3.07% sound 'crazy low' to me for that kind of lending. Granted ANZ own 100% of UDC. So they can charge whatever interest rate they like to UDC and no-one on the ANZ or UDC board will bat an eyelid. The increased size of the facility means that UDC can almost get away with not having any debenture holders! Why borrow from a debenture holder at 3.6% when you can get away with only paying 3% if you borrow that money off the parent bank?

Having these kind of low interest rates locked in for two years, in a climate where interest rates look to have bottomed, is bound to boost UDC profitability forecasts. And that will equate to a higher sale price for UDC, should it be sold. But are UDC really paying market interest rates on their borrowings? And if they are not, what does that say about any underlying sale price that might be achieved for UDC?

SNOOPY

PS For a comparison here is my take on the interest rate being paid by Heartland Bank over their FY2016 (YE 30th June 2016) .

Interest expense: $118.815m
Borrowings SOFY2016: $2,825.245m
Borrowings EOFY2016: $2,999.987m

Average Interest Rate Paid
= $118.815m / ($2,825.245m + $2,999.987m)*0.5
= 4.1%

[macduffy]

I said 'quasi utility' in that like a power connection and a phone connection and a roof over your head, every 21st century citizen must have a bank account. ANZ, like WBC, is part of the Australian Government 'four pillars' banking policy. I can't remember all the details of WBCs early 90s situation. But I think there was an implicit guarantee that the government woudl bail deposit holders out. That didn't help WBC shareholders at the time of course. But I don't think that even in the market's darkest days, there was ever a prospect that one of the four main Ozzie banks would close up. 'Too big to fail' being the classic Australian term.

SNOOPY

Yes, too big to fail, perhaps, but for Westpac shareholders the concern was that the heavily discounted rights issue needed to right the ship might "fail" and that a marriage with another of the big four might be ordained, to the disadvange of WBC shareholders. We can be rather relaxed about it now but at the time it was a serious concern, as evidenced by the bargain price at which the shares and rights traded.