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Kick Off: Australia and New Zealand Banking Group v Rio Tinto Limited

As the Motley Fool’s ASX World Cup moves through the knockout stages, we have two S&P/ASX 200 (ASX: XJO) (^INDEX: RIO) titans playing off for a spot in the final eight. The banking group’s first place qualifier, Australia and New Zealand Banking Group (ASX: ANZ) will be looking to continue its winning streak and get over the line against the somewhat unpredictable Rio Tinto Limited (ASX: RIO).

Here’s how they line up

Measure Rio Tinto ANZ Banking Group
Market Capitalisation $110 billion1 $92.2 billion
FY14 Forecast Dividend Yield 3.7% 5.1%
Forward Price to Earnings ratio 10 13.5
Price to Book Ratio 2.16 2.06
Return on Equity 27.8% 15.5%

Data sourced from Morningstar 1 Market Cap according to Google Finance.

Pre-Match Commentary

Known for its diversified operations, Rio has a rich history as one of the world’s premier resources companies. As Australia’s biggest iron ore miner, it is trumped only by Vale S.A (NYSE: VALE) in terms of total annual ore production. It also has a 30% stake in Escondida – the world’s biggest copper mine located in Chile – and an array of projects with global significance outside of iron ore and copper.

ANZ, a local banking heavyweight has been busy positioning itself as a beneficiary of the Asian Century as well as continuing to compete for retail banking market share in both Australia and New Zealand. Led by CEO Mike Smith, ANZ has successfully differentiated itself from its local peers.

GAME ON!

Early in the match it’s clear to see ANZ has a number of significant structural advantages over its rival whose performance depends largely on the iron ore spot price (In FY13 Rio derived around 90% of earnings from iron ore).

With a near dependence on a single commodity and the recent but not forgotten destruction of shareholder wealth by its former manager, in the 18th minute, ANZ captain Mike Smith goes forward and capitalises on Rio Tinto’s sloppy defensive tactics.

Rio Goalkeeper and CEO Sam Walsh took the reins of the global mining giant less than two years ago and has done a fantastic job with his team already, and with two fantastic saves late in the half, gives us a reason to keep a watchful eye on the business.

Thanks to his inspiring performance, Rio moves the ball forward along the wing with the quick but powerful Indonesian-born player, Grasberg (one of Rio’s big copper and gold projects), who crosses a low ball into the box and the fresh faced number ten, Oyu Tolgoi, combines well with Escondida to equalise the score in the dying seconds.

The half ends 1 – 1.

Unfortunately, the second half doesn’t play out nearly as well for the mining giant. Its iron ore business, the hugely influential midfield player, is stretchered off the park with a nail biting knee injury. With a well-rounded display from the ANZ squad which includes a bigger dividend yield and sound growth strategy, it scores twice at the end to the disappointment of Rio fans.

Final score 3 -1 to ANZ.

Despite a great win over a strong opponent, after the game in the press room analysts continue in their usual fashion and criticise Smith’s Super Regional Strategy but, as usual, he defends his team’s Asian strategy and politely recommends they go check its performance since inception. With Rio out, ANZ can now move into the final eight with bucket loads of confidence.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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