The Australia and New Zealand Banking Group (ASX: ANZ) share price is currently up 3% after announcing that it is increasing the share buy-back.
ANZ announced that it is increasing its on-market share buy-back by $1.5 billion to $3 billion.
The bank has received $1 billion of reinsurance proceeds as part of the first tranche of the sale of its Australian Life Insurance Business. After considering capital management options, ANZ decided the best use of the cash was to increase its buy-back.
ANZ Chief Financial Officer Michelle Jablko said “The progress of our transformation means we are able to return this surplus capital to shareholders while retaining appropriate flexibility to invest in our business and maintain unquestionably strong capital levels.”
According to ANZ, its Common Equity Tier 1 capital (CET1) ratio was 11.04% and it would increase by 56 basis points on a pro forma basis after adjusting for completion of the buy-back, receipt of the reinsurance proceeds and completion of announced asset sales.
ANZ has had a rough few months with courts, regulators and market commentators all taking a shot at it for its actions and processes.
This buy-back was probably the best way to improve its per-share statistics permanently, not just a once-off dividend.
The ANZ share price has rebounded strongly since 14 June 2018, it’s up by 9.5%. However, when you look back over the past five years, the price is virtually unchanged.
I personally don’t believe that ANZ will be a market-beater over the next year or the next three years. I think the credit growth contraction and a falling housing market will be bad for bank bad debts and loan book growth. It may only be trading at 12x FY19’s estimated earnings with a grossed-up dividend yield 8%, but I don’t think it’s a buy.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.