Australia and New Zealand Banking Group (ASX: ANZ) today reported better than expected results, the highlights being a $3.5 billion cash profit and a 14% increase in the interim fully franked dividend to 83 cents per share.
After a modest gain in morning trade, ANZ shares sold off, losing 54 cents or 1.57% in mid-afternoon trade, dragging the ASX/S&P 200 (Index: ^AXJO) (ASX: XJO) down with it.
Here are three reasons why the shares might be trading lower today…
1) Profit-taking. There's an old stock market "buy the rumour, sell the fact." The rumour was the results and dividends were going to be market beating. The fact is they are. ANZ shares, along with those of Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have been trading at or near record highs. Some profit taking was likely on the cards.
2) Valuation. On a price to book and P/E ratio, ANZ shares are richly valued. In this low interest rate environment, investors have been bidding up banks based on their fully franked dividends. As Bell Potter's Charlie Aitken recently said when downgrading bank stocks to hold, he doesn't expect the 5% fully franked dividend yield to be bid down any lower.
3) Competition. Bendigo and Adelaide Bank (ASX: BEN) chief executive Mike Hurst said in the AFR competition in the home loan market is creating a "race to the bottom" with banks taking on greater risk to entice customers. Such behaviour, especially when local unemployment is high and the country is staring at a Tony Abbott horror budget, rarely ends well.