Whether to buy, hold or sell shares in the big banks like Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA) and Australia & New Zealand Banking Group (ASX: ANZ) is a question always vexing the minds of retail and professional investors alike.
The banks make up over a quarter of the S&P/ ASX200 Index (ASX: XJO) so which way they travel often dictates which way the local share market travels.
Many investors have given them a wide berth over the past year on the back of falling house prices in Sydney and Melbourne, alongside rising costs being anticipated out of recommendations from the Royal Commission into financial services.
However, professional fund manager Yarra Capital Management has an 'overweight' position on ANZ Bank shares in its portfolio, so let's take a look why.
"ANZ's 1Q19 update showed solid capital levels, with a CET1 ratio of 11.3% above its peers. In our view the Royal Commission's Final Report clears the uncertainty pervading the industry and should alleviate pressure, enabling ANZ to generate above system credit growth through its mortgage market share and via an ongoing rebound in small-to-medium enterprise lending," commented the fund manager in its end of February 2019 portfolio report.
It's not hard to make the case for value in the banks after big share price falls over the past 18 months and now that the uncertainty has been removed around the Royal Commission some banks could be worth a look as Yarra Capital suggests.
This afternoon ANZ Bank shares change hands for $26.44 and analysts expect it to pay $1.61 per share in dividends over fiscal 2019 placing it on a 6.1% dividend yield plus full franking credits.
In other words the share price would only have to track sideways for it to offer a better return than a term deposit in the year ahead, and over the long term bank share values are likely to edge higher again while paying healthy dividends.
