Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy after falling 11.5% over the past year?

ANZ is a leading Australian and New Zealand banking institution, with a presence throughout the oceanic region. ANZ is one of the Big Four Aussie banks and derives much of its revenue from mortgages, personal loans and credit.

Is the ANZ share price a buy?

One of the most helpful things about the fall in the ANZ share price is that it has boosted the bank’s dividend yield. One of the main considerations about the ANZ share price is its very attractive 6.3% fully franked dividend yield. Assuming ANZ doesn’t cut its dividend payment in the future, this could be an attractive source of income.

ANZ has paid the same annual 160 cents per share dividend over the past three years, so management is likely to want to keep paying that dividend.

However, a key uncertainty for potential ANZ shareholders is the new rules and regulations the bank will have to follow. The banking regulator, APRA, is going to make banks raise billions in Tier II bonds to ensure they are ‘too big to fail’ and that money deposited by Australians is safe. Having to hold more capital could mean lower profits and less dividends.

Aside from the immediate Royal Commission costs of remediation and legal fees, ANZ may also face lower long term profit growth due to the additional lending checks it will need to undertake.

A major source of activity for ANZ loans comes from mortgage brokers, in FY18 around 55% of loans originated from a broker. There is a fear that the Hayne Royal Commission may directly or indirectly alter this part of the loan market.

That’s why I think ANZ decided to take the interesting decision to invest $40 million into online loan business Lendi, according to the Australian Financial Review’s Street Talk. The investment would make ANZ the second largest investor behind Macquarie Group Ltd (ASX: MQG).

Whatever happens in the Royal Commission, Lendi could be well placed to capitalise on any changes to the law. Since Lendi’s creation in 2013 it has settled close to $8 billion of loans.

Is it time to buy bank shares?

If Australia’s house prices keep falling then I’m not going to be interested in the banks because every negative month increases the risk of bad debts and lower profits. At this stage I’d rather go for shares with more reliable profits.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).