Of our four major banks, Australia and New Zealand Banking Group (ASX: ANZ) is unique.
It is the only big four bank actively seeking to expand and compete with others throughout Asia.
Launched in 2007 by current CEO Mike Smith, the bank's 'Super Regional Strategy' has been largely successful, so far. In the most recent reporting period, foreign markets accounted for 24% of group revenues, with management targeting between 25% and 30% by 2017.
Whilst its expansion in the region is promising and could provide a long-term ticket to earnings growth, its domestic businesses are also kicking goals for shareholders.
However, there are a number of reasons why now mightn't be the right time to buy ANZ shares.
- Bad debts. According to UBS analysis, bad debts at Australian banks are currently sitting near 20-year lows. Bad debts boost profits in the good times but hinder them in the bad times, which is when you want to buy shares.
- Credit Growth. Reserve Bank figures have recently revealed credit growth is easing, although demand for home loans remains strong. With unemployment tipped to rise and GDP growth slowing, demand for credit is unlikely to pick up anytime soon.
- Valuation. ANZ's current valuation leaves a lot to be desired, which is usually enough to perturb most value investors. Investors should look to buy in well below $30 per share, in my opinion.
A better buy than ANZ – Yours FREE!
At today's price, and given the outlook for the local economy, ANZ is best left on your watchlist. However if you want to find a stock with, a) a great dividend yield; and b) excellent overseas growth prospects, I urge you to keep reading below. It's a stock I recently bought and think you should too.
