ANZ - ANZ Banking Group

Bill M · 11 November 2009

ricee007 said:
Hehe, I bought MXUPA, FXJPB and GNSPA (and have held BEPPA). In profit on all of them, except GNSPA ($14 loss).

Well done mate, I love to see people making money. I just wish I had enough guts to buy GMPPA when they hit $13, now they are $62

ricee007 · 11 November 2009

Bill M said:
Well done mate, I love to see people making money. I just wish I had enough guts to buy GMPPA when they hit $13, now they are $62

I'm just annoyed I got into these in September.

Some of the prices some of the CPS I was looking at are hilarious!!! The 12 month lows... Sigh.

I think MXUPA was $12? They then hit $74 or so.

It is interesting how the margin is expected to be %3.10 to %3.30 while PERLS V is something similar recently issued with a margin of %3.40. BBSW increases the main driver to reduce the margin? A greater market desire for the product of this type means it doesn't need as much of a sweetener?

Perls v Raised $2Bn.
Perls v intended to raise either $500m or $750m

So, Perls V was 3 or 4 times oversubscribed.... AND EXCLUDED the general public, and was a month or so ago...

Credit markers are better now... and ANZ have learnt, somewhat, how many people wanted them.....

However, an indicative of 3.1-3.3 leads me to suspect that they expect over-subscription... and will allot more than $750m. Which makes me roll my eyes and be dissapointed.

Even at 2.9% I'm sure they could get $750M.

As to buying them for capital growth? Hmmm, valid points..... I just don't think they'll match my 'required' return.....They would need to trade at around $106....

*AND* I would need to buy $5,000 worth.....

Hmm, somewhat tempting..... perhaps if I had a bigger portfolio, and could divest into defensive assets.... but, I'm 90% sure I'll pass.

condog · 14 November 2009

To me its more a decision of income security v income growth

With your typical ANZ shares you can expect dividend growth of about 8-12% p.a. on average....

With CPS2 its pretty much expected rates will lift from the current lows of 3.5% to long term averages of 5% ish, possibly higher to 7% if stimulus measures crease an asset bubble that needs halling back in.....Any which way you look at it the probability is that this will rise.....hence your likely (not definitely) to recieve a rate of 6%ish now rising to 8%ish , maybee 9% ish, then pulling back slightly. These are paid quarterly in arrears and fully or mostly franked.....

Where as with your ANZ shares your likely to buy at around 4.9% today and grow this rate at approx 8-12% giving dividend returns of
@8% Growth = 4.9%, 5.29%, 5.71%, 6.17%, 6.66%, 7.19%, 7.77%, 8.39%
@12% Growth = 4.9%, 5.48%, 6.14%, 6.88%, 7.71%, 8.64%, 9.67%, 10.83%

In the past I would have said they will never match ANZ shares for cap growth, but given the significant and continuous Capital rasings and dilution of shareholders equity in all 4 banks , its more likely they might out perform.

In terms of linking them to aNZ price its not worth your brain space...... They are similar underlying investments and you will suffer similar gains or losses irrespective of which way the market moves if you have your money in both...or either....

Its an each way bet... Not a huge amount one way or the other on face value........Although preferentials have a habit of coming out on top...hence the reason people and institutions are so keen to get hold of them...

So whilst I will probably be applying for some, simply because of the strong track record for preferential shares, Id have to very strongly say if you dont understand them dont buy them.....

buttonzhu · 14 November 2009

hOW about the SP on Monday?

I assume it will be huge jump? Anyone can give a buy in price for suggestions??

Cheers

Julia · 14 November 2009

condog said:
Where as with your ANZ shares your likely to buy at around 4.9% today and grow this rate at approx 8-12% giving dividend returns of
@8% Growth = 4.9%, 5.29%, 5.71%, 6.17%, 6.66%, 7.19%, 7.77%, 8.39%
@12% Growth = 4.9%, 5.48%, 6.14%, 6.88%, 7.71%, 8.64%, 9.67%, 10.83%

How are you working that out? Are you assuming no rise in SP?
Obviously if ANZ shows some capital growth, the % dividend return will be diminished.

ricee007 · 14 November 2009

buttonzhu said:
hOW about the SP on Monday?

I assume it will be huge jump? Anyone can give a buy in price for suggestions??

Cheers

I'm slightly confused; why are you expecting such a massive jump? Am I missing something?

So, after all of this, who is considering taking up the CPS2 offer?

drlog · 16 November 2009

Julia, what condog is saying is that if you were to buy ANZ shares NOW and hold on to them, your dividend stream would increase. This is not accounting for capital gains at all.

ricee007, the reason you would go with this CPS2 offer is because it has a lot less risk. It could turn out that there is a massive recession and ANZ's profit slumps causing the dividends to go down and the share price to go down also. However, if youre in the CPS2, you know exactly what you're going to be getting. There are risks but they are extremely unlikely.

If you are in a position where you want a low risk investment, CPS2 is very attractive.

badger41 · 22 November 2009

Friday newspaper reports indicate that bank Hybrids are likely to have their quality rating scaled down to "just above junk bond" status by at least one rating agency. Note the big fall in the value of CBA Perls and other hybrids on Friday.

CPS2 is starting to look a bit less attractive than a few days ago. My guess, open around $97.

Cheers, badger

ricee007 · 22 November 2009

badger41 said:
Friday newspaper reports indicate that bank Hybrids are likely to have their quality rating scaled down to "just above junk bond" status by at least one rating agency. Note the big fall in the value of CBA Perls and other hybrids on Friday.

CPS2 is starting to look a bit less attractive than a few days ago. My guess, open around $97.

Cheers, badger

lol, badger, you are cute and ill informed.

It won't open at around $97.

It is VERY UNLIKELY that the Big 4 bank hybrids will be scaled down to just above junk bond status! This suggestion makes you lose all credibility. Potentially downgraded... sure.. that much? No.

The All ords dropped 61 points, 1.3% on Friday. And you wonder why bank hybrids dropped?
You mention the PERLS...
CBAPA (Perls V) dropped 0.38%
Perls III dropped 1.2%
Perls v dropped 2%
ANZ CPS1 dropped 0.1%
BENHB dropped 0.4%
BOQPC dropped 1.5%
NABHA dropped 0.1%
Mqcpa dropped 0.9%.

I er, get the feeling that they dropped in line with the market!?

"Friday newspaper reports"
LOL, this news has been around for about a month, longer? It is *VERY OLD* news and is NOT the reason for a drop in the price of CPS on Friday.

Besides, fundamentally, nothing will change. ANZCPS1, Perls V, Perls 3, Big Macs perpetual securities will all have the same risk, the same expected return, and should be worth the same amount. The only affect on price should come from institutions that don't have a mandate to invest in these securities that are rated more risky..... however, that affect should be very minor, and, very mostly temporary.

To put it into perspecitve, CBAPA, PCAPA, CBAPB, NABHA, ANZPB, WBCPA, WBCPB, WCTPA, NABHA (Every Big 4 bank hybrid on the ASX) are all rated A+. Below A+ is A. Below A is A-. Below A- is BBB+. (Note those Big 4 Banks are all rated AA, btw) I really don't think a change in ratings, for no fundamental reason, will actually change the fair value (and hence, the price) of these securities.

Largesse · 22 November 2009

If these trade below face value when they open i will be buying them in bulk quantities.

Badger. I can lend you the CSP2's that I will receive as part of my subscription for you to sell short if you like?

ricee007 · 22 November 2009

Largesse said:
If these trade below face value when they open i will be buying them in bulk quantities.

Badger. I can lend you the CSP2's that I will receive as part of my subscription for you to sell short if you like?

Mate, if you get that sort of agreement going, I'll actually get around to opening a margin account and buying $10,000 worth to allow him to "short" them as well!

Could be good!

ajc13b · 24 November 2009

condog said:
So whilst I will probably be applying for some, simply because of the strong track record for preferential shares, Id have to very strongly say if you dont understand them dont buy them.....

Is the general consensus that this this a fair comment?

I came on here to learn about the offer which I am able to participate in if I want. It sounds like a good opportunity to me based on what I have read to put some cash into that would otherwise sit in an ING savings account for 5 or so years.

I am certainly not an expert now, but I understand the concept better than I did. Should I avoid the offer?

drlog · 24 November 2009

ajc13b said:
Is the general consensus that this this a fair comment?

I came on here to learn about the offer which I am able to participate in if I want. It sounds like a good opportunity to me based on what I have read to put some cash into that would otherwise sit in an ING savings account for 5 or so years.

Well, the difference is that you can get out of the ING account with a guarantee of no capital loss. The CPS2 should have a higher return assuming you hold them until maturity or sell for a capital gain.

Also, consider that the CPS2 may be converted into shares at the end. You may not want that although you can sell them right away if that is the case.

ricee007 · 24 November 2009

Putting them into a bank account is less risk.

As the market is somewhat efficient, this equates to a lower expected return...

Ergo, the CPS2 should have a higher expected return.

I mean, look at bank accounts now..... BBSW is 3.92, margin is 3.1... know of any bank accounts (not term deposits) that pay over 7% per annum?

Realistically, I've talked to around 4 people that reckon this will open at above face value (instant capital gain), and, 1 person who disagrees... so, vote is 5:1........

"MacqBank has done 1.7%, NAB 1.25, Westpac 2.4, Westpac 1.0, Woolworths 1.1, ANZCPS1 2.5, Adelaide Bank 0.75, Bendigo Bank 1.75, BBI 1.15%!, BOQ 2%, Suncorp 0.75%, Elders at 2.2%!, CBA 1.05%, CBA 1.05%, Dexus Rents 1.3%, Fairfax 1.55%, Nurfarm 1.9%, etc, etc, etc."

Are currently traded hybrids on the ASX....

They were all created when credit markets were more open... hence with a lower margin. Now, credit markets are tight, so there has to be higher margins...

In the future, most people expect credit markets to loosen... which means that margins should reduce again... if margins reduce again, hyrbids with a high margin should trade at above $100 (think logically, if NAB releases a hybrid with a 2% margin in 2013 for $100... ANZ's 3.1% should be above $100)....

ajc13b · 24 November 2009

drlog said:
Well, the difference is that you can get out of the ING account with a guarantee of no capital loss. The CPS2 should have a higher return assuming you hold them until maturity or sell for a capital gain.

Also, consider that the CPS2 may be converted into shares at the end. You may not want that although you can sell them right away if that is the case.

Is it possible to hold to maturity and make a loss at all? I thought, at worst, you would get your $100 per preference OR an equivalent value of ANZ shares? Our plan is to hold to maturity (Although if face value goes through the roof we would be stupid to hold!)

ricee007 said:
Putting them into a bank account is less risk.

As the market is somewhat efficient, this equates to a lower expected return...

Ergo, the CPS2 should have a higher expected return.

I mean, look at bank accounts now..... BBSW is 3.92, margin is 3.1... know of any bank accounts (not term deposits) that pay over 7% per annum?

Realistically, I've talked to around 4 people that reckon this will open at above face value (instant capital gain), and, 1 person who disagrees... so, vote is 5:1........

"MacqBank has done 1.7%, NAB 1.25, Westpac 2.4, Westpac 1.0, Woolworths 1.1, ANZCPS1 2.5, Adelaide Bank 0.75, Bendigo Bank 1.75, BBI 1.15%!, BOQ 2%, Suncorp 0.75%, Elders at 2.2%!, CBA 1.05%, CBA 1.05%, Dexus Rents 1.3%, Fairfax 1.55%, Nurfarm 1.9%, etc, etc, etc."

Are currently traded hybrids on the ASX....

They were all created when credit markets were more open... hence with a lower margin. Now, credit markets are tight, so there has to be higher margins...

In the future, most people expect credit markets to loosen... which means that margins should reduce again... if margins reduce again, hyrbids with a high margin should trade at above $100 (think logically, if NAB releases a hybrid with a 2% margin in 2013 for $100... ANZ's 3.1% should be above $100)....

Great explanation, thank you very much! Maybe ANZ should farm out some of their documentation to you

awg · 24 November 2009

ajc13b said:
Is it possible to hold to maturity and make a loss at all? I thought, at worst, you would get your $100 per preference OR an equivalent value of ANZ shares? Our plan is to hold to maturity (Although if face value goes through the roof we would be stupid to hold!)

There are various clauses with these preference issues, that are different for each one.

Ultimately, the issuer needs to become insolvent, but in crisis, when holders become concerned, the capital value falls, so if you need or want to sell early, you will realise a loss.

Conversely if you bought some of the preference shares a while back at a marked down price, you get much higher effective yield, plus a very good chance of a tidy capital gain as the conversion or step up dates approach

There are some good links on the Hybrid thread if you want to know more

ricee007 · 26 November 2009

ajc13b said:
Is it possible to hold to maturity and make a loss at all? I thought, at worst, you would get your $100 per preference OR an equivalent value of ANZ shares? Our plan is to hold to maturity (Although if face value goes through the roof we would be stupid to hold!)

Yes.

Firstly, minor point, but, it's actually $101.01 of ANZ shares, or $100.

Secondly, yes, if ANZ goes under you may get a negative return.

Thirdly, sort of, if ANZ is unable to pay dividends, you could, potentially, merely get your $100 back.. as in, pay $100 now... have ANZ pay $0 dividends over the next 7 years, get $100 then.......

Fourthly, in 2016 (was it Dec 15 2016?), ANZ may choose to give you $101.01 of ANZ shares (pretend the VWAP is $33.67 for simplicity).... so, you would get 3 ANZ shares... but, you may not be able to sell them, (away on holiday, not knowing/able to sell them before they actually hit your broker, etc, etc, etc) for a couple of days... (hell, even overnight I suppose)... and the SP could plummet to $20.... I mean imagine if they calculated the VWAP at 5pm 16th December 2016... then, at 7pm, they released an interim report that showed the bank would pay only 10c dividends for the next 12 months... ASX:ANZ would open at, say, $15... and you can only sell at $15 (3*15= $45)...

Obviously, the way to avoid this is by selling them 'on the market' a couple of days before hand at, say, $99.80 each... or, realising the very low possibility that ANZ would screw $750M of CPS2 holders up ... never being able to raise billions from Hybrids on the ASX again (investors have a memory!)...

Finally, as has been stated, what if, for whatever reason, you need this money before 2016... there is the danger (IMHO, very low), that they will trade at under $100 (barring a GFC, I can't see this being very below $100... and, even then, not very very significantly below).

Great explanation, thank you very much! Maybe ANZ should farm out some of their documentation to you

Your welcome On my todo list today (as has been for the last 2 weeks!) Is to write an article on hybrids... but, I'm busy all day tomorrow (ha! I get to play with Cheetahs at Monarto Zoo!), and I'm getting cut up on Friday (ankle surgery)... perhaps I'll do a rushed job when i get home at midnight in around 24 hours... hmm. We'll see.

ricee007 · 5 December 2009

I generally dislike copying my posts between forums... but, perhaps some will find this useful.

"I will not substantiate these numbers, or declare them accurate. I just thought it was an interesting find.

According to ComSec:
WBC P/E 18.17
NAB 20.56
CBA 16.68
ANZ 13.39.

HOWEVER, furthermore, I would expect ANZ to have more growth than the others (Asian strategy, Australian customer service initiative before the others, and has the lowest market cap out of the Big 4 banks, HIGHEST T1 RATIO BY A COUNTRY MILE, aggressive CEO, etc).

Generally, high P/E ratios (20, etc) are from those companies with high growth potential (ERJ, etc)...
I'm not sure how updated those P/E figures are. Not sure if thats at close of last FY, or current, or what they are... but, I found it interesting nonetheless..."

Largesse · 6 December 2009

why don't you take the time to check whether the figures are accurate?

doesn't take long, just a quick read through the most recent annual report and some simple maths

oldblue · 6 December 2009

Largesse said:
why don't you take the time to check whether the figures are accurate?

doesn't take long, just a quick read through the most recent annual report and some simple maths

One of the problems with P/E's of course is that they can be historical or prospective, and if the former are they based on last year's NPAT or on an annualised interim figure? If it's a prospective P/E, whose forecast is it based on ? Or is it an analysts' consensus forecast? So it's a big trap for unwary players!

We need to know the answers to these questions to comment on CommSec's numbers and to bear in mind the "rubberiness" of any such numbers.

ANZ - ANZ Banking Group

Bill M

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ricee007

condog

buttonzhu

Julia

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ricee007

drlog

badger41

ricee007

Largesse

ricee007

ajc13b

drlog

ricee007

ajc13b

awg

ricee007

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Largesse

oldblue

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