Banks - A look at ANZ & WBC

by James Gerrish 25 October 2010

Banks - By James Gerrish 
 
Banking stocks on the local market found their feet today after almost a month of underperformance. If we take a look at a chart of the financial sector v the S&P/ASX 200 the recent theme is quite obvious.  


 
A number of factors have contributed to this theme including:
  • The threat of a property bubble (I totally disagree with this as there are fundamental reasons for a buoyant property market in most capital cities)
  • The attraction of resource stocks based on surging commodity prices (underpinned by US dollar weakness)
  • Heightened uncertainty about financial companies in the US and Europe – filters through to sentiment here
 
Today we saw a rebound in the sector which gives us a good reason to review our favoured picks

The banks we’ll look at here are Westpac and ANZ. CBA has been omitted as it is does not have a dividend coming up in the next month. NAB has been omitted as I disagree with its focus of growing operations in Europe and prefer to avoid if from an investment perspective.
 
ANZ (ANZ)– remains my number 1 pick within the sector and has been quite resilient over the past month. ANZ reports full year results on Thursday with a dividend due on the 5th November. ANZ announced today that it had been granted approval by the Reserve Bank of India (RBI) for a foreign banking licence. The banking licence will help ANZ to grow in India and towards the goal of becoming a super regional bank in the Asia Pacific. A strategy that I firmly believe will offer ANZ a unique advantage over the other major three institutions. Full Research Report on ANZ attached. Recommendation: BUY

 Westpac (WBC) – from a valuation matrix, Westpac now takes the crown of being the cheapest of the big four! This is based on price to earnings and price to book ratios. Westpac generally trades at a premium to both ANZ and NAB however at the moment we’re seeing the stock trade at a discount to historical multiples. This gives us a good reason for further analysis. Another positive is the Fully Franked 5.8% yield with a dividend due early November. Full research report on WBC attached. Recommendation: BUY
 
  Conclusion – For those without exposure to WBC or ANZ, I believe its worth starting to accumulate a holding in each stock to pick up the dividends in November and potential for upside in the coming months. 

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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