Australia and New Zealand Banking Group (ASX: ANZ) is fast becoming the most rewarding big bank to hold in your share portfolio. In the past year alone, investors who bought ANZ shares are sitting on gains of 19%, not including dividends.
Although shares in both Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA), have outperformed ANZ in the past decade, savvy investors know, it's the future, not the past, which is important to us.
With that in mind, here are three reasons why I think ANZ will outperform its peers and the S&P/ASX 200 Index (ASX: XJO) (INDEX: ^AXJO) in the next decade.
1. Asia. ANZ is more leveraged to the rising prosperity of Asia's middle-class than any big bank. Although National Australia Bank Ltd (ASX: NAB) and Westpac are both looking to capitalise on trade flows to and from Asia, ANZ is the only one to derive significant earnings from the region. In its most recent half-year, Asia, the Pacific, Europe and Americas (APEA) markets, accounted for over 19% of FX-adjusted cash profit.
2. Growing domestically. Of the big banks, ANZ has the fastest growing home loan portfolio. Although, between them, Commonwealth Bank and Westpac control nearly 50% of the Australian mortgage market, ANZ is most rapidly growing its exposure. It is also increasing its business banking portfolio.
3. It's very profitable. ANZ, unlike some of its peers, is a very efficient lender. In the most recent half year it had the widest net interest margin (2.15%) of the big banks, a return on equity of 15.5% and cost to income ratio of 44.3%.
Should you buy ANZ now?
ANZ appears to have a lot of upside potential over the ultra-long-term but I believe the short and medium-term growth prospects are fully priced into the stock. As such, I'm waiting for a substantial setback in price before committing to a purchase.
