What does ANZ do?
ANZ [ASX:ANZ] is one of Australia’s ‘big four’ banks. Under former CEO Mike Smith, it differentiated itself by pursuing an Asian growth strategy. But given the tougher competitive issues in the Asian banking market, the strategy hasn’t been a success. As a result, its share price has been under considerable pressure.
Making matters worse, today it announced that bad debts for the half year would be $100 million worse than predicted just a few weeks ago.
What’s happening to the ANZ share price?
The chart below shows ANZ’s share price performance over the past two years. Since peaking in April 2015 at just over $37, the share price declined 40% before rebounding slightly in March this year.
But with today’s bad debt increase announcement, the stock price is under pressure again.
What now for ANZ?
The banking sector had a tremendous run from 2012 to 2015 on the back of falling interest rates and rising house prices. Over this time, bad debt charges also fell to near record lows.
But now they cycle is turning and bank profit growth and dividends will not be as strong in the future as they have been in the recent past.
The 50% decline in the share price since the 2015 peak tells you that. But just because the share price has corrected significantly doesn’t mean it’s a good time to buy.
The fundamentals and the charting outlook for ANZ are poor. There is a high probability that the share price downtrend will continue. One of my investment rules is to never buy into a share price downtrend. The odds just aren’t on your side and you’ll never know how far or long the downtrend in prices will persist.
That why I never assess a stock’s fundamentals without looking at the charts too. Combining fundamental analysis with charting can yield powerful results.
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Editor, The Daily Reckoning