ANZ 'Stressed' and 'Impaired' loan trend: 2012 to 2016
Quote:
Originally Posted by
Snoopy
So how does the five year picture for the 'stressed loan' position of the ANZ Bank unfold? And could we have used this picture to predict the capital raising of FY2015 before it was announced?
|
"Stressed' Loans on the books (X) |
Net Financial Recivables (Impairment deducted) (Y) |
(X)/(Y) |
Impaired Loans |
Gross Financial Recivables (Z) |
(W)/(Z) |
FY2012 |
$11,639m |
$425,188m |
2.74% |
$2,635m |
$427,823m |
0.6159% |
FY2013 |
$12,099m |
$481,575m |
2.51% |
$2,311m |
$483,886m |
0.4776% |
FY2014 |
$12,319m |
$520,859m |
2.37% |
$1,552m |
$522,141m |
0.2972% |
FY2015 |
$13,142m |
$569,535m |
2.31% |
$1,403m |
$570,938m |
0.2437% |
FY2016 |
$14,052m |
$575,139m |
2.44% |
$1,368m |
$576,507m |
0.2373% |
The above chart shows a steady decrease in 'impaired loans' as a percentage of all loans. The rights issue capital injection happened just prior to the end of FY2015. But the impaired loan picture was steadily improving before then.
Contrast this to the 'stressed loan' picture, steadily getting worse in dollar terms. However in percentage terms it was falling too (until FY2016), albeit not as fast as the percentage picture of impaired loans.
So my predictor statistic, for checking out the likelihood of a capital raising has failed its purpose :-(. Or has it?
SNOOPY
Buffett Point 1/ FY2016: Top Three Position in Chosen Operating Markets
I aim to assess whether the ANZ Bank is a suitable candidate to which to apply the (Mary) 'Buffett' growth model .
Parent ANZ, incorporated in Australia, describes the operation of their business in the FY2016 Annual Report as follows:
1/ Raising funds through customer deposits and wholesale debt markets.
2/ Lending those funds to customers in both the 'personal lending' (personal home loans, credit cards, overdrafts) and business (corporate and institutional lending).
3/ Operating 'funds management', 'insurance' and 'superannuation' divisions.
The business is based around strong Australian and New Zealand foundations, leveraging 'geographic footprint' and 'market leading service'.
The business objectives are to support:
1/ Australian and New Zealand homeowners and small business customers,
2/ Regional Trade and Capital Flows for business customers via the IIB ("International and Institutional Banking Division".)
3/ A 'digital ready infrastructure'.
Major Competitors in this sector are listed in order by $A revenue (interest income).
1/ Commonwealth Bank of Australia: $33,817m
2/ Westpac Bank: $31,822m
3/ ANZ Bank: $29.951m
4/ National Australia Bank $27,629m
Conclusion: As number three in the market, ANZ passes the first Buffett Point test.
SNOOPY
Buffett Point 2/ FY2016: Sustainable 'eps' trend
The trend below is required to track higher for five years with one setback allowed.
Financial Year |
Net Sustainable Profit (A) |
Shares on Issue EOFY (B) |
eps (A)/(B) |
2012 |
$6,132m |
2,744m |
$2.24 |
2013 |
$6,599m |
2,757m |
$2.39 |
2014 |
$7,111m |
2,757m |
$2.58 |
2015 |
$7,130m |
2,903m |
$2.46 |
2016 |
$6,834m |
2,927m |
$2.33 |
Result: Fail Test
SNOOPY
PS Readers may notice a divergence between some of these 'eps' figures and those published elsewhere. The figures I use are 'normalised' by a number of adjustments. For example the FY2016 and FY2015 'normalised profits' are calculated as follows (Most adjustments may be found under the 'Non Interest Income' (Note 4) and 'Expenses' (Note 5) sections of the "FY2016 Annual Report":
|
FY2016 |
FY2015 |
Declared NPAT 'Cash Profit' |
$5,889m |
$7,216m |
add Movement on other Financial Instruments at fair value through profit & loss |
+0.7x $214m |
-0.7x $241m |
add Impairment charge from AMMB Holdings Berhaud |
+0.7x $260m |
remove Gain on selling stake in Bank of Tianjin |
-0.7x $29m |
remove Gain on Ensada divestment |
-0.7x $66m |
remove Loss on CVA methodology change |
+0.7x $237m |
add back Restructuring charges |
+0.7x $278m |
+0.7x $31m |
add back Amortising & Impairment of Other Intangibles |
+0.7x $83m |
+0.7x $88m |
add back Software Amortisation Policy Change (Incremental) |
+0.7x ($556m- $188m) |
Total |
$6,834m |
$7,130m |
Not everyone may agree with the way I have done these adjustments. But if you want a picture of the ongoing profitability of ANZ you have to do them. I see that someone has quoted the eps figure from the 4-traders website for FY2016 as $1.89 per share.
If you just pull the headline profit figure out of the annual report of $5,709m and divide by the number of shares on issue I get:
$5,709m / 2,927m = $1.95
Not sure how they got down to $1.89. But I would describe that figure as seriously misleading (a 20% error) and not reflective of the underlying performance of ANZ for FY2016. I just wanted to make the point of not believing everything you read on some of these websites! Even using ANZ's preferred metric of cash profit this is down by 18% YOY. The impression might be that ANZ has a disastrous year. Yet taking out the 'one off' adjustments, my representative profit declined by only 4%. An unwelcome development, but not something that I would dub a major concern.
When making these adjustments it is not always clear which pieces of data should be adjusted. I am working from something called the 'cash profit'. AR2016 p18 shows that to make the bridge between ''statuatory profit' and 'cash profit' you make the following adjustments:
a/ Allow for treasury share dividends.
b/ Correct for Revaluation of policy liabilities
c/ Correct for economic hedges
d/ Correct for revenue hedges
e/ Correct for 'Structured credit intermediation trades'
These adjustments have already been made if you start with 'cash profit'. So when perusing Note 4 and Note 5, I paid particular attention not to adjust for these items again, as to do so would have been 'double counting.' Did I get all my adjustments right? I can't say. But I have tried to be consistent with my adjustments. In a multi-year comparison I think being consistent is more important than chasing down the last decimal point of accuracy.
SNOOPY
1... 2... 3... 4... 5... 6... 7... 8... 9... 10...
Quote:
Originally Posted by
Snoopy
...I see that someone has quoted the eps figure from the 4-traders website for FY2016 as $1.89 per share.
If you just pull the headline profit figure out of the annual report of $5,709m and divide by the number of shares on issue I get:
$5,709m / 2,927m = $1.95
Not sure how they got down to $1.89. But I would describe that figure as seriously misleading (a 20% error) and not reflective of the underlying performance of ANZ for FY2016. I just wanted to make the point of not believing everything you read on some of these websites!
ANZ FY2016 Annual Report, Page 62, Income Statement for the year ended 30 September, Earnings per ordinary share (cents), Diluted, 189.3
You really should read the reports carefully.
Paper Tiger
Buffett Point 3/ FY2016: Return on Equity history
The table is required to have an ROE figure of >15% for five years in a row, with one setback allowed.
Financial Year |
Net Sustainable Profit (A) |
Shareholder Equity EOFY (B) |
ROE (A)/(B) |
2012 |
$6,132m |
$41,240m |
14.9% |
2013 |
$6,599m |
$45,603m |
14.5% |
2014 |
$7,111m |
$49,284m |
14.4% |
2015 |
$7,130m |
$57,353m |
12.4% |
2016 |
$6,834m |
$57,927m |
11.8% |
Result: Fail Test
By way of comparative observation though, despite ANZ ROE suffering a declining trend while the Heartland ROE trend is rising, the ANZ ROE in absolute terms remains noticably superior to Heartland
SNOOPY
Buffett Point 4a/ FY2016: Net Profit Margin history
What we are looking for here is the ability to raise margins at above the rate of inflation over some time period longer than two years back to back.
Financial Year |
Net Sustainable Profit (A) |
Gross Interest Revenue (B) |
Net Profit margin (A)/(B) |
2012 |
$6.132m |
$30,538m |
20.1% |
2013 |
$6.599m |
$28,627m |
23.1% |
2014 |
$7,111m |
$29,524m |
24.1% |
2015 |
$7,130m |
$30,526m |
23.4% |
2016 |
$6,834m |
$29,951m |
22.8% |
Result: Pass Test
The average 'net profit margin' for five years was 22.7%. The comparative figure for Heartland was 16.7%
SNOOPY
Buffett Point 4b/ FY2016: Gross Interest Margin history
What we are looking for here is the ability to raise margins at above the rate of inflation over some time period longer than two years back to back.
Financial Year |
Interest Income (A) |
Interest Expense (B) |
EOFY Finance Receivables (C) |
Gross Interest margin [(A)-(B)]/(C)] |
2012 |
$30,538m |
$18,428m |
$427,823m + $13,969m |
2.74% |
2013 |
$28,627m |
$15,869m |
$483,264m |
2.64% |
2014 |
$29,524m |
$15,714m |
$521,752m |
2.65% |
2015 |
$30,526m |
$15,910m |
$562,173m |
2.60% |
2016 |
$29,951m |
$14,856m |
$575,852m |
2.62% |
Result: Fail Test
Note: I have made an adjustment to the EOFY receivables for FY2012. This is because there was a change in accounting policy in FY2013 which I have retrospectively applied to FY2012. As far as I can figure out this change relates to bringing assets from the balance sheet of associate companies, in which ANZ has a significant influence as to who is on the board, onto the ANZ balance sheet. Note 39 in AR2013 lists the significant associates of ANZ as
1/ AMMB Holdings Berhad, Malayasia, 24% voting interest
2/ PT Bank Pan Indonesia, Indonesia, 39% voting interest
3/ Shanghai Rural, China, 20% voting interest
4/ Commercial Bank, China, 20% voting interest
5/ Bank of Tianjin, China, 18% voting interest
6/ Saigon Securities, Vietnma, 18% voting interest
7/ Metrobank Card Corporation, Philippines, 40% voting interest
The collective assets of all associated businesses are then listed. But there is no way to know what proportion of those assets are 'financial receivables' and so determine the incremental amount that should be added to the FY2012 balance sheet to reflect the change in accounting policy. So I have simply assumed there is not too much change between FY2012 and FY2013. I have taken the revised figure we do know about (FY2013) and applied the same incremental difference to the FY2012 result.
The interesting thing about this test 4b, compared with 4a, is that for the first three years even though the interest margin remained flat (actually decreased a bit), the net profit margin rose. This is indicative of costs being taken out of other parts of the business to boost profits, while interest margin was near constant. The last two balance dates have had the cash from the recent ANZ 'cash issue and placement' brought onto the books. Holding more cash at the bank for the same sized loan book is a sure way to decrease bank profitability. (it also makes the bank more resilient in case of a market shock, the purpose of the recapitalisation exercise). And as we can see this effect. In FY2015 and FY2016 , the net profit margin of the bank has indeed reduced.
SNOOPY
Buffett Growth Model Screening (FY2016 perspective): Overall Conclusion
This is the summary for those millennials who are 'attention span challenged'. Warren Buffett's scanning of the 'growth potential' of a company can be summarized in four quick questions.
Q1/ Does ANZ Bank have a top three market position in the markets in which it chooses to operate? (Ref: my post 410)
A1/ Yes
Q2/ Does ANZ Bank have a 'normalised profit' increasing 'earnings per share trend'? (Ref: my post 411)
A2/ No
Q3/ Does ANZ Bank have a record of earning a superior ( >15% ) return on shareholder equity? (Ref: my post 415)
A3/ No
Q4/ Does ANZ Bank have the capability of operating at increasing Net Profit margins? (Ref: my post 416)
A4/ Yes
Overall Conclusion
ANZ is not able to satisfy all the requirements to apply Warren Buffett's compounding growth model. This does not mean that ANZ is necessarily a poor investment going forwards. It just means that ANZ must be analyzed in a different way. It might be sensible to regard ANZ as a pure 'dividend play' from here.
SNOOPY
ANZ Five Year Dividend Record (1) : Dollars from FY2012 to FY2016
Quote:
Originally Posted by
snoopy
It might be sensible to regard anz as a pure 'dividend play' from here.
The following table is based on 'earnings scenarios' based on actual earnings over the FY2012 to FY2016 years. I feel that these five years are representative of the earnings climate for ANZ going forwards.
ANZ has reported their new dividend policy is to pay 60-65% of 'Cash Profit' out as a dividend each year. I have taken the mid point of the expected payout range (62.5%) when calculating the dividend that might have been paid, had the current dividend policy been in force from FY2012.
|
FY2012 |
FY2013 |
FY2014 |
FY2015 |
FY2016 |
Row Total |
Normalised Profit (Snoopy) |
$6,132m |
$6,599m |
$7,111m |
$7,130m |
$6,834m |
$33,806m |
Statuatory Profit (ANZ) |
$5,661m |
$6,310m |
$7,271m |
$7,493m |
$5,709m |
$32,444m |
Cash Profit (ANZ) |
$5,830m |
$6,492m |
$7,117m |
$7,216m |
$5,889m |
$32,554m |
FY2017 Policy Dividend: 62.5% Cash Profit |
$3,644m |
$4,219m |
$4,448m |
$4,510m |
$3,680m |
Actual Dividend (Below) %ge of 'Cash Profit' |
69.3% |
71.4% |
67.4% |
68.6% |
81.9% |
Actual Dividend Paid Out |
$3,702m |
$4,088m |
$4,700m |
$4,907m |
$5,001m |
less DRP Reinvestment |
($1,461m) |
($843m) |
($851m) |
($1,122m) |
($413m) |
Net Dividend Paid Out |
$2,241m |
$3,245m |
$3,849m |
$3,785m |
$4,588m |
There are a couple of points of note from this table.
1/ The historical payout percentage rate has been well above the new targeted payout percentage rate (60-65%) for the last five years. It follows that if we take the same earnings profile projected out into the future, future dividends will be less.
2/ If you include the dividends paid out and reinvested back into company shares, then the net dividend paid is well within the 60-65% payout target for future years (except FY2016). Despite this, the chairman's address in (AR2016, p6) speaks of the agony of making the decision to cut dividends going forwards and returninng the payout ratio to historical norms. I take it from this that the dividend cut from FY2016 onwards refers to the actual dividend entitlement, with no account taken of any net reduction that might come from the DRP. IOW ANZ shareholders really can expect lower dividends going forwards.
SNOOPY
ANZ Five Year Dividend Record (2) : dps from FY2012 to FY2016
Quote:
Originally Posted by
Snoopy
The following table is based on 'earnings scenarios' based on actual earnings over the FY2012 to FY2016 years.
Note: Figures in the table below are all in Australian currency. NZ imputation credits have been converted to $A using the present day representative exchange rate of $NZ1 = $A0.95.
|
FY2012 |
|
FY2013 |
|
FY2014 |
|
FY2015 |
|
FY2016 |
|
Dividend Declared (final/interim) 'cps' |
76c(f) |
66c(i) |
79c(f) |
73c(i) |
91c(f) |
83c(i) |
95c(f) |
86c(i) |
95c(f) |
80c(i) |
add Imputation Credit (NZ) 'cps' |
0c |
0c |
0c |
9c x 0.95 |
10c x 0.95 |
10c x 0.95 |
12c x 0.95 |
10 x 0.95c |
11c x 0.95 |
10c x 0.95 |
Gross Dividend (NZ Perspective) 'cps' |
76c(f) |
66c(i) |
79c(f) |
81.6c(i) |
100.5c(f) |
92.5c(i) |
106.4c(f) |
95.5c(i) |
105.5c(f) |
89.5c(i) |
Gross Annual Dividend (NZ Perspective) 'cps' (final) + (interim) |
$1.42 |
|
$1.60.6 |
|
$1.93 |
|
$2.01.9 |
|
$1.95 |
|
Gross Annual Dividend (Aus Perspective) 'cps' (final) + (interim), (assumes 30% franking credit) |
$2.02.9 |
|
$2.17.9 |
|
$2.48.6 |
|
$2.58.6 |
|
$2.50 |
|
ANZ dividends have, since FY2013, been paid with NZ imputation credits attached. These NZ imputation credits have since been maintained on all subsequent dividends. You can see from the above table though, that the NZ dividends paid to NZ shareholders are not fully imputed. This is evident when comparing gross dividends from both a New Zealand and an Australian perspective. Australian dividends are 'fully franked' (the equivalent of 'fully imputed, in NZ) for Australian tax purposes. And the much higher gross return for Australian shareholders verses their New Zealand counterparts is plain to see.
I am not clear why New Zealand shareholders have only received NZ Imputation credits since FY2013. ANZ.NZ was clearly a very profitable bank before then! Yet although all dividends declared since FY2013 have contained impuation credits, the amount of that credit is subject to the profitability of the New Zealand arm of the business. This means that if a large restructuring took place in New Zeland over a year, for example, those imputation credits we NZ shareholders do get could disappear for a year.
SNOOPY
ANZ Forecast Dividend Scenario Analysis (based on FY2012 -FY2016 data) Attempt 1
I now want to use the actual dividend data for FY2012 to FY2016 inclusive to build a 'scenario analysis' looking forwards.
The basis for my model is that market conditions over the last five years are broadly representative of what we might expect over the next five years. Yet in recent times, the capital base of the company has been expanded, because of Basel 3 international banking standards requiring a greater capital base to support the existing bank loan book. The expansion of ANZ's capital base has been as a result of a share issue, including a share purchase plan offer to existing shareholders and institutional share placement. Unfortunately for existing shareholders, this means that broadly the same income stream must now be distributed among the greater number of shares now on issue. In other words, unless there is a corresponding growth in profitability from the new share capital (there won't be, because the new capital is required to be used as a beefed up safety net), earnings per share can be expected to decrease in the future.
The following table shows what would have happened if the number of shares on issue today was constant over the previous five years.
|
FY2012 |
FY2013 |
FY2014 |
FY2015 |
FY2016 |
Gross Annual Dividend (NZ Perspective) 'cps' (final) + (interim) |
$1.42 |
$1.60.6 |
$1.93 |
$2.01.9 |
$1.95 |
Actual Number of Shares on Issue EOFY |
2,744m |
2,759m |
2,757m |
2,903m |
2,927m |
Actual Dividend %ge of 'Cash Profit' |
69.3% |
71.4% |
67.4% |
68.6% |
81.9% |
Scenario Number of Shares on Issue EOFY |
2,927m |
2,927m |
2,927m |
2,927m |
2,927m |
Scenario Adjusted Gross Annual Dividend (NZ Perspective *) 'cps' (final) + (interim) |
$1.33.1 |
$1.51.4 |
$1.81.8 |
$2.00.2 |
$1.95 |
There is a problem with the table above. We have been told for a fact that to continue to meet 'modern capital requirements', the dividend will be reduced to a payout ratio of 60 to 65% of the declared 'cash profit' The table tells us that this percentage has been exceeded for all years over the past five years. This, in all likelihood, means that using the cash dividends listed above as indicative for the future means that we are going to forecast future cash dividends to be too high. So what happens if we reduce the payout ratio on those historical records down to 62.5% (the mid point of the 60% to 65% future declared dividend target range) of 'cash profit'?
* In this instance "NZ Perspective" means dividends continue to be expressed in $A, but the $A dividend is a 'gross dividend' because NZ does not recognize Australian Franking Credits. In addition NZ imputation credits are added to the $A dividend using the exchange rate $NZ1 = $A0.95.
SNOOPY
ANZ Forecast Dividend Scenario Analysis (FY2012 -FY2016 data) Attempt 2 Inputs
Quote:
Originally Posted by
Snoopy
So what happens if we reduce the payout ratio on those historical records down to 62.5% (the mid point of the 60% to 65% future declared dividend target range) of 'cash profit'?
Note:
1/ All dollar figures listed are in Australian dollars, unless specified otherwise.
2/ Because the New Zealand Dividends are not fully imputed, I am assuming the the gross value of imputation credits passed on will not be affected as the gross dividend is reduced.
|
Scenario FY2012 |
Scenario FY2013 |
Scenario FY2014 |
Scenario FY2015 |
Scenario FY2016 |
Average Across Five Scenarios |
Annual Declared Dividend 'cps' [(final) + (interim)] (imputation credits excluded) |
$1.42 |
$1.52 |
$1.74 |
$1.81 |
$1.75 |
Actual Dividend %ge of 'Cash Profit' |
69.3% |
71.4% |
67.4% |
68.6% |
81.9% |
Scenario First Adjustment: Declared Annual Dividend 'cps' [(final) + (interim)] (62.5% payout ratio) (A) |
$1.28 |
$1.33 |
$1.61 |
$1.65 |
$1.34 |
Actual Number of Shares on Issue EOFY (B) |
2,744m |
2,757m |
2,757m |
2,903m |
2,927m |
Scenario Number of Shares on Issue EOFY (C) |
2,927m |
2,927m |
2,927m |
2,927m |
2,927m |
Scenario Second Adjustment: Normalise Dividend for Today's Number of shares (A) x [(B)/(C)] => {D} |
$1.20 |
$1.25 |
$1.52 |
$1.64 |
$1.34 |
Actual Imputation Credits (Conversion $NZ1- =$A0.95) (E) |
0 |
$(0.09 x 0.95) |
$(0.20 x 0.95) |
$(0.22 x 0.95) |
$(0.21 x 0.95) |
Scenario Third Adjustment: Normalise Imputation Credits for Today's Number of shares (E) x [(B)/(C)] => {F} |
0 |
$0.08 |
$0.18 |
$0.21 |
$0.20 |
Gross Dividend: NZ Investor Perspective {D} + {F} |
$1.20 |
$1.33 |
$1.70 |
$1.85 |
$1.54 |
$1.524 |
SNOOPY
ANZ Forecast Dividend Scenario Analysis (FY2012 -FY2016 data) Attempt 2 Valuation
Quote:
Originally Posted by
Paper Tiger
So when do we actually get the forecast of future earnings, dividend payout and do we get a valuation with that?
I can hardly handle the suspense any longer.
Best Wishes
Paper Tiger
I start from the 'Average Across Five Scenarios' 'Gross Dividend: NZ Investor Perspective'. That figure comes out at $1.524 per share. And this is one key to the valuation.
The other key figure is a bit more subjective, and you as an investor need to answer the question.
"For a bank such as ANZ, what is the gross yield that would feel comfortable with?"
You could say that banks are a quasi-utility that will be there through thick and thin. I use a 6.0% figure for those.
Yet the ANZ, like all the big 4 Aussie banks, has an ivory tower institutional division that does all sorts of high powered stuff with currencies, futures and options. Regular bank customers on the street would go into shock if they found out if they found out their safe solid bank was doing this stuff. Luckily it is so incomprehensible that even half the people who work in the ANZ institutional division do not understand what is going on. So no-one worries about it. Very occasionally it all blows up with dramatic effect, such as in the GFC. Boring bank shares I would accept a 6% yield from. But with 'institutional stuff' going on behind the scenes I would add in a further 0.5% 'risk factor' to the ANZ.
So my answer to the question I posed is 6.5%:
Divide 'return' by 'the yield' and you get the share price that I would feel comfortable paying:
$A1.524 / 0.065 = $A23.44 or in NZ dollar terms
$A23.44 / 0.95 = $NZ24.67
Current share price on the NZX as I write this is $NZ30.90, which is 25% above my 'comfortable valuation'. So this means I should sell down, or does it?
SNOOPY
Whilst waiting for my movie companions
I am sure that every value investor does not like, and avoids, paying a high price.
But what you regard as a high price based on your approach others see as a good entry point.
We all have our share of buys that went the wrong way don't we?
But hopefully in the long term we are all the richer, in wisdom as well as dollars.
Best Wishes
Paper Tiger
ANZ Forecast Dividend Scenario Analysis (FY2012 -FY2016 data) Attempt 3 Inputs
Quote:
Originally Posted by
Snoopy
Divide 'return' by 'the yield' and you get the share price that I would feel comfortable paying:
$A1.524 / 0.065 = $A23.44 or in NZ dollar terms
$A23.44 / 0.95 = $NZ24.67
Current share price on the NZX as I write this is $NZ30.90, which is 25% above my 'comfortable valuation'. So this means I should sell down, or does it?
The answer is no, I should not sell down, or at least not sell down on this revelation. Why not? Because my analysis is done from an NZ perspective. Even though I am an NZer and live in NZ, the ANZ share price is largely driven by Australian investors living in Australia. So in my mind it makes most sense to look at this share from an Australian perspective.
Quote:
Originally Posted by
Snoopy
Note:
1/ All dollar figures listed are in Australian dollars, unless specified otherwise.
2/ Because the New Zealand Dividends are not fully imputed, I am assuming that the gross value of imputation credits passed on will not be affected as the gross dividend is reduced.
Note:
1/ All dollar figures listed are in Australian dollars, unless specified otherwise.
2/ Because the Australian Dividends are fully franked (at 30%), I am assuming that the gross value of franking credits passed on will reduce in proportion as the gross dividend is reduced.
|
Scenario FY2012 |
Scenario FY2013 |
Scenario FY2014 |
Scenario FY2015 |
Scenario FY2016 |
Average Across Five Scenarios |
Annual Declared Dividend 'cps' [(final) + (interim)] (imputation credits excluded) |
$1.42 |
$1.52 |
$1.74 |
$1.81 |
$1.75 |
Actual Dividend %ge of 'Cash Profit' |
69.3% |
71.4% |
67.4% |
68.6% |
81.9% |
Scenario First Adjustment: Declared Annual Dividend 'cps' [(final) + (interim)] (62.5% payout ratio) (A) |
$1.28 |
$1.33 |
$1.61 |
$1.65 |
$1.34 |
Actual Number of Shares on Issue EOFY (B) |
2,744m |
2,757m |
2,757m |
2,903m |
2,927m |
Scenario Number of Shares on Issue EOFY (C) |
2,927m |
2,927m |
2,927m |
2,927m |
2,927m |
Scenario Second Adjustment: Normalise Dividend for Today's Number of shares (A) x [(B)/(C)] => {D} |
$1.20 |
$1.25 |
$1.52 |
$1.64 |
$1.34 |
Gross Dividend: Aussie Investor Perspective {D}/0.7 |
$1.71 |
$1.79 |
$2.17 |
$2.34 |
$1.91 |
$1.984 |
SNOOPY
ANZ Forecast Dividend Scenario Analysis (FY2012 -FY2016 data) Attempt 3 Valuation
Quote:
Originally Posted by
Snoopy
I start from the 'Average Across Five Scenarios' 'Gross Dividend: NZ Investor Perspective'. That figure comes out at $1.524 per share. And this is one key to the valuation.
The other key figure is a bit more subjective, and you as an investor need to answer the question.
"For a bank such as ANZ, what is the gross yield that would feel comfortable with?"
You could say that banks are a quasi-utility that will be there through thick and thin. I use a 6.0% figure for those.
Yet the ANZ, like all the big 4 Aussie banks, has an ivory tower institutional division that does all sorts of high powered stuff with currencies, futures and options. Boring bank shares I would accept a 6% yield from. But with 'institutional stuff' going on behind the scenes I would add in a further 0.5% 'risk factor' to the ANZ.
So my answer to the question I posed is 6.5%:
Divide 'return' by 'the yield' and you get the share price that I would feel comfortable paying:
$A1.524 / 0.065 = $A23.44 or in NZ dollar terms
$A23.44 / 0.95 = $NZ24.67
Current share price on the NZX as I write this is $NZ30.90, which is 25% above my 'comfortable valuation'.
I start from the 'Average Across Five Scenarios' 'Gross Dividend: Aussie Investor Perspective'. That figure comes out at $1.984 per share. And this is one key to the valuation.
The other key figure is a bit more subjective, and you as an investor need to answer the question.
"For a bank such as ANZ, what is the gross yield that would feel comfortable with?"
You could say that banks are a quasi-utility that will be there through thick and thin. I use a 6.0% figure for those.
Yet the ANZ, like all the big 4 Aussie banks, has an ivory tower institutional division that does all sorts of high powered stuff with currencies, futures and options. Boring bank shares I would accept a 6% yield from. But with 'institutional stuff' going on behind the scenes I would add in a further 0.5% 'risk factor' to the ANZ.
So my answer to the question I posed is 6.5%. From an Australian perspective though, I get a slightly different answer. The New Zealand Official cash rate is 1.75%. The Australian Official Cash Rate is 1.5%. To reflect this difference, I am reducing the yield I require from ANZ by the difference in those two figures, 0.25%. This means the new yield I am happy with is 6.25%
Divide 'return' by 'the yield' and you get the share price that I would feel comfortable paying:
$A1.984 / 0.0625 = $A31.74 or in NZ dollar terms
$A31.74 / 0.95 = $NZ33.41
Current share price on the NZX when I started this exercise was $NZ30.90, which is 7.5% below my 'comfortable valuation'. This result, and giving the share price some room to breathe, tells me that ANZ is 'hold' at these prices.
From an investor perspective, I like to buy at below fair value. So what if I was in the market to buy some more ANZ? For a quasi-utility type investment this means a 20% discount to fair value, a price of $NZ26.73 for ANZ.NZX shares.
SNOOPY