Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy? The ANZ share price is drifting lower when most other ASX shares are rising.
At the pre-open price, ANZ is actually 8% lower than it was at the start of May 2020.
The major ASX bank recently reported its result on 30 April 2020. Within that result statutory profit declined by 51% to $1.54 billion and cash profit fell 60% to $1.4 billion.
Obviously the ongoing coronavirus impacts are a big reason why the bank profit fell so hard. The result included impairment charges of $1.674 billion that included increased credit reserves for COVID-19 impacts of $1.031 billion.
And what about the all-important dividend? It was deferred to a later date. Who knows if that means it will be paid or cancelled altogether? It depends how tough things are going to get. ANZ certainly followed APRA’s dividend guidance.
How tough will things get for the ANZ share price?
It’s hard to say right now. The ANZ share price is already down 43%, how much worse could it get?
With the jobkeeper package being overestimated, perhaps the economy won’t be as hit as hard as first thought. Maybe the share price sell-off is overdone if Australia’s economy is only modestly affected by what’s going on.
But what’s certain is that the official Australian interest rate is now extremely low. This definitely makes it harder for ANZ to make solid profit. It will hurt the net interest margin (NIM). It’s not like ANZ can start charging interest for transaction accounts.
There’s going to be pain this year, it’s why the ANZ share price is down so much. The question is how quick the economy will recover. We just don’t know. There’s a chance ANZ’s share price could be this low for some time.
I’d rather buy shares where the potential outcomes aren’t as negative, long lasting and wide ranging as ANZ.
That’s why I’ve got my eyes on the following leading shares for my portfolio:
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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