Australia and New Zealand Banking Group (ASX: ANZ) has been tipped by analysts to grow faster than each of its peers. In fact, Morningstar's analysts' consensus is forecasting a whopping 18% earnings per share (EPS) growth in 2014.
That compares with Westpac Banking Corp's (ASX: WBC) 8% forecast earnings growth and National Australia Bank Ltd's (ASX: NAB) 7.2% growth. So could now be the time to bag-a-bargain?
Unfortunately, savvy investors know that no stock is a buy at any price and ANZ shares appear to have risen into a price range which is unsustainable for long-term outperformance of the broader S&P/ASX 200 Index (ASX: XJO) (^AXJO). What I mean is there are two sides to every investment.
On the one hand we have a bank which is likely to grow at a much more rapid pace than its peers, largely because of its Asian growth model, dubbed the Super Regional Strategy, but on the other hand we have a current price tag which has fully priced in the forecast growth.
For example the bank currently trades on a trailing price-earnings (P/E) ratio of 15.5 and a price-book (P/B) ratio of 2.07. Way above its historical averages.
Despite growing earnings from its Asia, Pacific, Europe and Americas markets (which now account for 19% of FX-adjusted cash earnings), ANZ's Australian operations are beginning to succumb to increased pressure from regional lenders and mortgage brokers like Yellow Brick Road Holdings Ltd (ASX: YBR) and Mortgage Choice Limited (ASX: MOC).
In addition, in its most recent half year, it's Net Interest Margin (NIM) fell to just 2.15% as competition for funding and demand for credit heated up. However ANZ wasn't alone, with even Commonwealth Bank of Australia (ASX: CBA) – our most profitable big bank – feeling the effects of low interest rates.
A BETTER buy than ANZ
ANZ is Australia's fastest growing big bank but has a valuation which matches the expectations placed upon it. I would not buy ANZ at current prices and have previously said anything below $24 per share (a major discount to today's price) would be an acceptable price to pay. Call me fussy. Call me picky. But in the world of investing there's two things I know for sure:
1. Patience doesn't lose us money, and;
2. There are better opportunities available (see below)
