MENU

What you missed in Australia and New Zealand Banking Group’s (ASX:ANZ) profit results

The Australia and New Zealand Banking Group (ASX: ANZ) share price is paring gains as we head into the close and I think many have missed the mark when looking at its profit results today.

Shares in ANZ Bank are currently up 1% at $25.93 after rising as high as $26.16 as investors cheered the fact that its underlying cash profit was ahead of consensus. The bank also has room to undertake a capital return of some sort, which is more than what we can say about the other big banks.

But here’s the issue. The quality of the result is poor as the better than expected cash profit isn’t due to loan growth or expanding margins.

If anything, both have reversed and if that isn’t bad enough, the deterioration accelerated in the second half.

On the flipside, the cash profit was significantly bolstered by a large lowering of provisions. Some of this can be explained by changes in its institutional business but in a climate where house price falls are getting worse, this stands at odds with falling provisions.

Bear in mind, that the full impact of slumping home prices and upcoming issues with refinancing isn’t reflected in the FY18 results.

Looking at ANZ Bank’s charts on benign delinquencies will give you a false sense of security.

I chatted with a managing director of a national mortgage broker recently and he commented that one-in-five of his customers can only get refinanced on much smaller loans as the big banks have tightened the loan approval process.

These borrowers will have to either cough up more cash to pay down the original loan or remain trapped with their current lenders who will very likely slug them with higher mortgage rates due to rising funding costs.

What’s more alarming is that he thought the situation will get worse before it gets better.

I may be a shareholder in ANZ Bank but the result gives me little comfort despite claims by some experts that the depressed bank valuation already reflects the bad news.

It’s a hollow reassurance. Valuations may reflect the current bad news, but I don’t think it fully factors in potential upcoming issues in the market.

At least ANZ Bank shareholders can take comfort that the share price performance today isn’t so bad when you compare it to National Australia Bank Ltd.‘s (ASX: NAB) share price and Westpac Banking Corp’s (ASX: WBC) share price as both stocks have slumped into the red.

NAB will report its results tomorrow followed by Westpac on Monday. Only Commonwealth Bank of Australia (ASX: CBA) won’t report as it has already handed in its report card in August.

Looking for blue-chip stocks that have better potential to outperform the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index? The experts at the Motley Fool may have just the thing for you.

Click on the free link below to find out what they think the best blue-chip stocks for FY19 are.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, National Australia Bank Limited, and Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!