The Australia and New Zealand Banking Group Limited (ASX: ANZ) share price has risen over 37% in the period since close of trading on Friday 22 May. This is the largest rise of all the four major banks. The larger National Australia Bank Ltd. (ASX: NAB) follows closely behind with a rise of just over 33% for the same period.
Why are bank shares rising?
Across the world, it’s starting to look like the economic fallout from COVID-19 could be less significant than originally anticipated. This is particularly the case in Australia. On 26 May, UBS analyst Jonathan Mott, a known market bear, raised his expectations of the banking sector. Jonathan pointed out the current underperformance of bank shares given the better than expected outlook.
Many economic factors point to a recovery in bank performance. Not least of which was the $60 billion saving in JobKeeper due largely to clerical errors. An additional $10.6 billion in household spending power after early superannuation withdrawals and improvements in card and retail data are also contributing to optimism surrounding the sector.
It remains to be seen what will happen in September when the government assistance comes to an end. Still, the share prices of all major banks have all been relatively slow to rise since the March low point.
On 27 May, National Australia Bank announced it was increasing its capital raising to $4.25 billion, including an additional $1.25 billion for retail investors. This announcement appeared to carry the NAB share price higher along with the other major banks.
Tier 1 capital fueling the ANZ share price rise
On 2 June, ANZ announced it had sold its New Zealand business UDC Finance for 1.2x tangible asset value. This will provide an additional ~$439 million of Tier 1 capital, or available cash from retained earnings, in this case. This saw the ANZ share price rise even further.
In the ANZ chairman’s report on 28 May, we learned that statutory profit after tax was down 51% for the first half of 2020. Accordingly, the board agreed to defer the decision on dividend payments. While this does not close the door on a dividend payment, it definitely reduces the certainty around whether it will eventuate. The chairman, David Gonski, acknowledged the value shareholders place on the regular payment of bank dividends and promised further information in August.
Foolish takeaway
It appears that the bank share prices are starting to level up to pre-pandemic levels. However, the ANZ share price is still down 14.9% year to date. Based on its current price of $20.97 at the time of writing, it would still require an increase of nearly 30% to reach the levels we saw in February prior to the crash. I’m not sure how long it will take, but I am confident the ANZ share price will return to these former levels.
Furthermore, ANZ’s twelve month trailing dividend yield is 8.09%. This is a very healthy dividend payout. Nevertheless, it remains to be seen when or even if the banks will recommence dividend payouts at or near pre-pandemic levels. Though, I believe this is likely.
In my view, it is the size and stability of the dividend payment that attracts fund managers and retail investors.
For some more ASX shares you might want to check out today, take a look at the report below!
NEW! 5 Cheap Stocks With Massive Upside Potential
Our experts at The Motley Fool have just released a FREE report detailing 5 shares you can buy now to take advantage of the much cheaper share prices on offer.
One is a diversified conglomerate trading over 30% off it’s all-time high, all while offering a fully franked dividend yield of over 3%…
Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.
Plus, this free report highlights 3 more cheap bets that could position you to profit in 2020 and beyond.
Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares.
But you will have to hurry because the cheap share prices on offer today might not last for long.
As of 2/6/2020
More reading
- ASX 200 jumps 2.5%: Big four banks surge higher, CSL announces an acquisition
- ASX 200 Weekly Wrap: ASX bulls crash through 6,000 points
- ‘Westpac share price undervalued’, says analyst
- Is the Macquarie share price the best ASX bank to buy?
- Top brokers name 3 ASX 200 shares to buy next week
Motley Fool contributor Daryl Mather 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.
The post The ANZ share price has soared 37% in 2 weeks. Here’s why. appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/30mWDtW
Leave a Reply