Like the rest of its 'Big Four' compatriots, the Australia and New Zealand Banking Group (ASX: ANZ) share price has had a clanger of a year. Down over 15% from its 52-week high at the time of writing, ANZ has been punished by the scourge of misconduct revelations and dirty laundry that has been aired throughout 2018 at the Royal Commission into the financial services industry.
Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd.(ASX: NAB) share prices have not escaped the thresher either, all significantly down from their all-time highs.
The Royal Commission woes coupled with the slump in Australia's property prices and new lending restrictions have led retail (aka 'mum and dad') investors to wash their hands of the banks in the last 12 months. Investors who have stuck it out this far are nervously awaiting the final Royal Commission report due to be published on Friday.
Why am I bullish on the ANZ share price?
As one of the 'Big Four' banks, ANZ already enjoys several competitive advantages, including a "household name' brand, extensive pricing power and low-cost operations. But ANZ is the only bank to currently have a share buy-back program in place (where the company buys back its own shares from the market).
The banks are famous for their fat dividends, but share buy-backs are another way for companies to deliver returns to shareholders by increasing the earnings per share (EPS) of the remaining stock. Warren Buffet himself says he prefers buy-backs to dividends, so I am encouraged by ANZ's $3 billion program, particularly as its shares have been relatively inexpensive recently.
I believe ANZ has responded positively to the Royal Commission, announcing that remuneration paid across the company this financial year will be reduced by $124 million, in addition to a $130 million package to assist drought-affected farmers. All of the banks have a lot of work to do to restore their battered reputations, but this is certainly a good start for ANZ.
And of course, at current prices, ANZ is paying a fully-franked dividend yield of 9% going into 2019, which is nothing to complain about.
Foolish Takeaway
With a P/E ratio of 10.92, I believe the ANZ share price is looking extremely attractive both from a value and yield perspective and would be a strong foundation for any income-based portfolio. I would wait for the final Royal Commission report before buying any of the Big Four banks, just in case there are any more nasties, but from a fundamental level, there is no doubt ANZ is a solid business.
