Could it be time to buy Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares?
What has been happening recently for ANZ?
Over the last six months the ANZ share price has risen by 36%, which mostly came during November after the announcement that the vaccines being developed seemed very effective against the original COVID-19. There’s ongoing research into whether it’s effective against the UK and South African variants.
As one of the biggest banks in Australia, ANZ is leveraged to the economic recovery of the country, particularly with how strongly the Australian housing market is performing.
In the monthly CoreLogic update for January 2021, national dwelling prices went up by 0.9%, with combined regional areas seeing growth of 1.6%.
According to CoreLogic’s research director, Tim Lawless, the divergence between metro and regional housing demand in New South Wales and Victoria is more substantial than in other states. “Internal migration data shows more people are leaving Sydney and Melbourne for regional areas, resulting in a transition of activity from the metro regions to the outer fringe and regional markets. This demographic trend is further compounded by the demand shock of stalled overseas migration. As Melbourne and Sydney historically receive the vast majority of overseas migrants, these metro areas have been the hardest hit by this demand shock.”
“Better housing affordability, an opportunity for a lifestyle upgrade and lower density housing options are other factors that might be contributing to this trend, along with the new found popularity of remote working arrangements.”
A strong property market is good news for ANZ because it is likely to mean lower bad debts and higher loan growth.
ANZ is expected to release its FY21 first quarter update on 18 February 2021, but we may have seen an insight into how things are going in the Commonwealth Bank of Australia (ASX: CBA) half-year result when the bank said that its cash net profit after tax (NPAT) declined by 10.8% to $3.89 billion.
Summary thoughts
I think that the ANZ share price has already been through most of the recovery phase, so I can’t see much more capital growth to come over the next few months. However, I do think we’ll see substantially higher dividends in 2021 from ANZ compared to 2020. The worst of COVID-19 is hopefully behind us and there won’t be any more substantial, painful provisions in the financial accounts.
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