Question: Accepting the big 4 Banks are “tops”, where do you assess Ben (Bendigo Adelaide)?
Answer (By Paul Rickard): All the banks will benefit from the interest rate cut through “yield compression” – so Bendigo is at post GFC highs.
That said, I prefer the major banks to the regional banks going forward. The regional banks were cheap, however, they rallied strongly in late 2013/early 2014 and I can’t see anything particularly compelling in their offer. As a group, despite some often-interesting innovation, they do lag in technology and are not making market share gains.
As for the brokers, they are neutral on Bendigo. According to FN Arena, sentiment is 0.0 (scale -1.0 most negative to +1.0 most positive), with a consensus target price of $12.71.
Question 2: Would you consider buying ANZPE at these levels ($98.25) a better option than the new capital raising ANZ is currently embarking upon?
Answer 2 (By Paul Rickard): Usually, the market is very efficient at arbitraging out any price anomalies. Both the capital note issues (ANZPE and the new note) have identical terms, except for ANZPE being roughly one year shorter. ANZPE pays a coupon of 3.25% over the 180-day bank bill, the new Capital Note 3 issue will pay a margin of 3.60%.
At a price of $99.00, ANZPE is trading at a margin of 3.83%. If you ignore brokerage and the fact that the secondary market is often very thin, then you would be better off buying the ANZPE than participating in the new Capital 3 Notes issue.
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