The ANZ (ASX: ANZ) share price is down 43% from when the share market started falling because of COVID-19, is it a buy?
What is ANZ?
ANZ is a leading Australian and New Zealand banking institution, with a presence throughout the oceanic region. ANZ is one of the Big Four Aussie banks and derives much of its revenue from mortgages, personal loans and credit.
What’s going on with ANZ?
One of Australia’s biggest ASX banks has seen a big fall in sentiment about its near term prospects. ANZ and the other major ASX banks are expected to carry a lot of the economic pain with everything that’s going on.
Credit impairment charges of $1.67 billion that included increased credit provisions for the impact of COVID-19 of $1.03 billion were included in the recent FY20 half year report.
ANZ reported that its statutory profit after tax fell by 51% to $1.5 billion. Continuing cash profit dropped by 60% to $1.4 billion. Cash earnings per share fell by 60% to 50 cents per share. Only time will tell whether the provision that ANZ has made is adequate or has seriously underestimated the pain we’re going to see in 2020.
Is the ANZ share price a buy?
Most non-institutional investors choose the banks for their big dividend yield and low share price (compared to the earnings). But that dividend is now very uncertain after the decision to defer it. Banks may never be as generous with the dividend payout ratio again. We just don’t know what the future holds. Huge businesses like banks won’t be allowed to fail and they have to remain systematically strong, which lowers profits.
Perhaps this very low share price is good value. I wouldn’t want to bet on it though, I would much rather buy these technology shares instead:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.