ANZ still growing across Asia Pacific

ANZ continues to evolve into an Asia Pacific banking powerhouse, rivaling others like DBS in Singapore for regional growth. We often compare the two on metrics like earnings growth and returns on equity. ANZ has traditionally been focused on the Australia & New Zealand market (hence its name) but over the past few years took a concerted effort under ex-HSBC boss Mike Smith to widen its fortunes up north into the South East Asian market.

The bank today announced a respectable A$1.53bn profit for the first three months of the financial year. The number was not a blowout like the Commonwealth Bank of Australia which reported on Wednesday (see our report titled Which bank is now valued at US$111bn?) but it does mean ANZ is on track to meet 2013 consensus earnings of $6.2bn as measured by Thomson Reuters. There were some doubts around the number in early morning trade but any weakness seems to be only temporary around provisioning the margin movements in Australia. Expansion plans into Asia are on track according to management.

DBS shares have added only 0.2% over the past six months and 7.4% over the past three months, when compared to ANZ’s 18.1% and 15.9% performance over the same periods. ANZ is a much larger organisation and hence has been able to attract regional investors looking for liquidity through this market rally. In terms of market capitalisation, ANZ currently stands at around US$79bn while DBS stands at a much smaller US$30bn.

Market estimates for ANZ are for earnings growth of around 6-7% this year compared to a 10% decline for DBS. This is the main difference in the Asia Pacific banking space, there aren’t too many large groups with solid diversification like ANZ expected to continue growing earnings at a sustainable rate. DBS grew its earnings at a much faster pace over the past few years but that growth has now come to a halt. The chart below, sourced through Reuters, charts the performance of each bank over the past year.