The Australia and New Zealand Banking Group (ASX: ANZ) share price was out of form in November.
During the month the banking giant’s shares tumbled a disappointing 10.1% lower.
This means that ANZ’s shares thoroughly underperformed the S&P/ASX 200 index, which recorded a 2.7% gain.
Why did the ANZ share price tumble 10% lower in November?
Investors were selling ANZ’s shares last month for a number of reasons.
At the start of the month the bank’s shares came under pressure after investors gave its full year results a lukewarm reception.
In FY 2019 ANZ delivered a cash profit from continuing operations of $6.47 billion. This was flat on the prior corresponding period and a touch short of the market’s expectations.
And while the bank held firm with its final dividend of 80 cents per share, it reduced the franking on this dividend to only 70%.
ANZ’s CEO, Shayne Elliott, explained: “In proposing the Final Dividend and franking level, the Board considered the bank’s strong capital position and its organic capital generation capacity. Our decision to reduce franking to a new base reflects the changed shape of our business as well as recognising how important the dividend, franking and predictability is to shareholders.”
The changed shape of the business is a reference to ANZ’s divestment of its wealth businesses in Australia, as well as the changing operating environment.
Westpac and AUSTRAC.
Also weighing on the bank’s shares was news that AUSTRAC has alleged that Westpac Banking Corp (ASX: WBC) has breached the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act on 23 million occasions.
This out of the blue bombshell sparked concerns that ANZ and other banks could also have unknowingly breached the AML/CTF act.
ANZ attempted to ease concerns by providing an update on the actions it has taken to assist in the prevention of financial crime in the Australian banking system. It also revealed that it is not aware of any impending litigation from AUSTRAC.
ANZ Chief Risk Officer Kevin Corbally said: “ANZ has been working with AUSTRAC, law enforcement and the broader industry to detect, prevent and disrupt serious financial crimes. This includes money laundering, terrorism, human trafficking, tax evasion and child exploitation. Given recent issues identified by AUSTRAC within the industry, we have been reviewing the systems and processes we use to transfer money to ensure we are reporting the information required by regulators. While the review is ongoing, it has found no material issues to date.”
Nevertheless, this didn’t stop some investors from heading to the exits last month.
Should you buy the dip?
I think the pullback in ANZ’s shares has created a buying opportunity for investors with limited exposure to the banking sector.
Especially given its generous dividend and the current low interest rate environment. ANZ’s shares currently offer a partially franked 6.5% dividend yield.
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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.