The Australia and New Zealand Banking Group (ASX: ANZ) share price has fallen around 9%, is it a buy?
The major ASX bank's FY19 result didn't inspire confidence for investors. Statutory profit after tax fell 7% to $5.95 billion. Continuing cash profit was essentially flat at $6.47 billion, return on equity (ROE) fell 10 basis points (0.10%) to 10.9%, return on average assets dropped 4 basis points (0.04%) to 0.68% and the total credit impairment charge as a percentage of average gross loans and advances increased by 1 basis point (0.01%) to 0.13%.
The share buyback helped continuing cash profit per share (EPS) grow by 2% to 227.6 cents, which helped the total dividend per share stay at $1.60, although the composition of earnings meant the franking credit level was reduced from 100% to 70%.
Franking credits are only generated by Australian taxes paid. In FY19 ANZ only generated 55% of its statutory profit from Australia, 29% was from New Zealand and 16% was from international sources. In FY17, 64% of ANZ's earnings were generated from Australia.
The lower the share price the better value, so it's more attractive to buy ANZ today than it was a month ago. The dividend yield is now boosted to a partially franked 6.3%, with franking credits it still amounts to around 8%.
Foolish takeaway
A business can go up after reporting and be cheap, or it can down and be expensive. ANZ is trading at under 12x FY20's estimated earnings. I don't think ANZ looks look a screaming buy even if it's price/earnings ratio is low. I'm unconvinced that it can grow profit in this low net interest margin (NIM) environment.
