Why the ANZ Banking Group Share Price Dropped 2% Today

Why the ANZ Banking Group Share Price Dropped 2% Today

ANZ Banking Group Ltd [ASX:ANZ] fell almost 2% today, to a low of $31.49.

What happened to ANZ Banking Group?

According to the Australian Financial Review:

Bank analysts have taken the knife to their earnings forecasts for ANZ Banking after Tuesday’s interim result revealed the extent of the earnings hole in the institutional bank.

Their half-yearly results showed an operating income decline of 3%, to $9.99 billion.

Credit Suisse analysts Jarrod Martin and James Ellis said ANZ provided “a sombre tone to kick-off bank reporting season, with soft revenues highlighting the urgency for efficiency actions”,’ according to the AFR.

Like many other analysts, Credit Suisse downgraded its ANZ earnings estimates. It moved them down by up to 2 per cent throughout the forecast period, while noting that lower revenues would be offset by lower costs and bad debts.

What now for ANZ Banking Group shares?

Even though ANZ’s share price has fallen 2%, it doesn’t make it cheap. The company has a price-to-earnings ratio of 16.6-times earnings, which is more or less in line with their peers. However, on a cash flow basis, ANZ does look cheap.

ANZ is trading at 7.7-times their 12-month free cash flow (the cash shareholders could theoretically take out of the business). In contrast, competitor Westpac Banking Corp is trading at 26-times their free cash flow.

Goldman Sachs analyst Andrew Lyons expects ANZ to outperform their peers, given its focus on cost-cutting and rebalancing away from risky lending.

Maybe Lyons is right. But I’d encourage you to do your own research and judge ANZ’s future prosperity yourself.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: If you’re interested in investing and want to know a little bit more to get started, you need to check out Kris Sayce’s new report, ‘The Top Five Oversold Blue-Chip Stocks in Australia’.

Kris is the publisher and investment director here at Money Morning. He’s scoured the ASX to find the five most oversold blue chips worth buying.

In his report, Kris will show you the common denominator that makes these five blue chips cheap and how you can identify more investments like them in the future.

To get your free copy of Kris’ report, click here.

Harje Ronngard

Harje Ronngard

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

Leave a Reply

Be the First to Comment!

Notify of
wpDiscuz