ANZ Continues to Derisk Asian Business and Strengthen Capital Position

Despite the Moving Pieces, ANZ Bank's Fiscal 2016 Result Is in Line. FVE Increased.

ANZ to Sell Retail and Wealth Businesses in Five Asian Countries

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Equity Bottom-Up

Australia & New Zealand Bankin / Equity Bottom-Up

The sale of Australian and New Zealand Banking Group’s asset finance business in New Zealand was well flagged, but the 1.6 times price/book value ratio impressed, resulting in an approximate AUD 100 million net gain on sale. The sale is consistent with new CEO Shayne Elliott’s strategy to dispose of noncore assets, improve balance sheet settings and boost return on equity. The transaction is a small deal for ANZ Bank and does not weaken our wide moat and medium uncertainty ratings.Our AUD 29 fair value estimate is unchanged and at current prices the stock is modestly overvalued trading 8% above our valuation. We maintain our positive long-term view on the strategy to refocus on the core Australian and New Zealand banking franchise. The UDC Finance business was sold for NZD 660 million and importantly releases about 10 basis points of common equity Tier 1 capital increasing common equity Tier 1 ratio to a peer leading approximate 10.2%.Analyst: David Ellis &amp; Ravi Reddy

The sale of Australian and New Zealand Banking Group’s asset finance business in New Zealand was well flagged, but the 1.6 times price/book value ratio impressed, resulting in an approximate AUD 100 million net gain on sale. The sale is consistent with new CEO Shayne Elliott’s strategy to dispose of noncore assets, improve balance sheet settings and boost return on equity. The transaction is a small deal for ANZ Bank and does not weaken our wide moat and medium uncertainty ratings.Our AUD 29 fair value estimate is unchanged and at current prices the stock is modestly overvalued trading 8% above our valuation. We maintain our positive long-term view on the strategy to refocus on the core Australian and New Zealand banking franchise. The UDC Finance business was sold for NZD 660 million and importantly releases about 10 basis points of common equity Tier 1 capital increasing common equity Tier 1 ratio to a peer leading approximate 10.2%.Analyst: David Ellis &amp; Ravi Reddy

No Surprises in ANZ Bank's Sale of NZ Asset Finance Business