How is ANZ worth $5.50 less than WBC, page-9

I think there a few reasons for ANZ to trade at a discount to the other banks currently. but this is only my two cents on it, I could be completely wrong about it.

1) ROE - It has been choppy/trending lower over the past 5 years, and this issue has been confirmed with Mike Smith recently saying aiming for 16% ROE is a stretch and essentially not achievable.

2) Bad and Doubtful debts - Has increased in the last year by a good percentage, furthermore it has the highest bad and doubtful debts relative to book size.

3) Provisions - lower provision levels relative to the other banks (from memory).

4) Net interest margin - NIM has fallen further then the other banks. Also Asian exposure has a poor NIM due to high competition currently. ANZ stated they suffered in the last quarter of this year - Will this continue?

5) Asian Exposure - Great when China is at full steam but not good when the economy isn't tracking as hoped.

6) Dividends - Risk that growth in dividends may halt next year (as final div didn't increase this year)


7) New Capital Requirements - Hard to truly gauge the effect of the extra capital requirements will have on the profitability of the bank going forward. ANZ in the process of selling Esanda to Mac Bank which will aid in additional capital for the lending book.

I think the first four points I mention are the most important regarding ANZ trading at such lower levels in comparison to WBC. WBC at the moment looks as though it has a much cleaner lending book to ANZ, as its ROE is higher and more stable, smaller amount of bad a doubtful debts, better cost to income ratio and a few other things that make it more attractive overall.

Hope that helps explain the price difference GIZ.