established: 1835, ASX code: ANZ, homepage: www.anz.com.au

Overview
ANZ Bank is one of the BIG FOUR Australian banks operating a very large network of branches around Australia, New Zealand and South Pacific. In recent years ANZ has been rapidly rapidly expanding all over the Asia-Pacific region becoming the biggest banking institution in New Zealand and gaining ever increasing footprint in major Asian economies such as China, Indonesia, Malaysia and more.

Analysis of 2007 financial results:

• Market Cap: Depending on the daily stock price, the total market capitalization is around $56 billion over 1,864 million shares on issue
• Shareholders Equity: $21.1billion making the stock’s book value approx. $11.34 per share (9.6% growth on FY2006)
• Earnings per share: $2.22 making the average EPS growth in last 3 years about 12%
• Return on Equity: 19.6%, averaging about 18.3%pa in last 3 years
• Return on total Assets: 1.12%, averaging about 1.05%pa in last 3 years
• Balance Sheet: Total assets $340.4bln versus total liabilities of $333.6bln (TA/TL ratio of 1.11)

Sharemaket’s valuation:
Average ANZ’s Price to Earnings ratio of 12.8 suggests the share price around $28.5 ($2.23 EPS x 12.8 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 9%
• Share price in 10 years time: about $67 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $90.5 (share price of $67 plus $23.5 of the 10 years worth of dividends if the current payout ratio of 65% persists)
• Rate of Return in next 10 years based on beginning of November 2007 price of $30 per share: 11.7%pa

Pros and cons:
+++ Long established company one of the top performers in its industry
+++ Good ROA and exceptional ROE year after year
+++ Strong balance sheet
— Rush expansion to somehow riskier markets could potentially introduce more volatility to future earnings
— Short term results may be significantly affected by current “credit crunch�? crisis

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This entry was posted on Wednesday, November 7th, 2007 at 1:27 pm and is filed under Australian stock. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.