Australia Markets close in 1 hr 40 mins

The real reason why ANZ share price is lagging the big banks

Brendon Lau
ANZ Bank

If you are wondering why the Australia and New Zealand Banking Group (ASX: ANZ) share price is lagging the other big banks, it’s probably because its haemorrhaging market share.

While three of the four big banks are underperforming the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index, the ANZ share price is the worst as it’s fallen by more than 7% over the past year to $26.74 on Friday.

The National Australia Bank Ltd. (ASX: NAB) share price is in third spot with a decline of around 3% and the Westpac Banking Corp (ASX: WBC) share price is largely flat over the period. The Commonwealth Bank of Australia (ASX: CBA) share price is the only one that’s beating the ASX 200 with a gain of about 12% when the index is up 5%.     

Market share and share price link

What strikes me is that the performance of the bank stocks seems to be related to their share of the home loan market with a report in the Australian Financial Review highlighting the collapse in ANZ’s loans as a percentage of the total market.

The laggard’s book of owner-occupier mortgages was $176.9 billion in June this year and that equates to 15.7%, according to APRA’s data. It’s book of investment loans was $76.8 billion, or 13.8% of the market.

In contrast, ANZ’s share of the owner-occupier market was 16.4% and investor loan market was 14.7% in June 2018.

This marks an unprecedented drop in market share for a big bank, according to industry insiders quoted in the AFR.

What’s worse for ANZ shareholders is that the bank may never recover lost ground with an expert noting that a big bank can only hope to regain 0.5% of market share over five years if it had a very well executed strategy.

No easy fix for ANZ

The bank’s injuries are also believed to be largely self-inflicted. It’s reported that the bank clamped down harder than its rivals in scrutinising loan applications in the wake of the Banking Royal Commission and have adopted illogical practices.

For instance, ANZ would turn down applications from mothers returning to work after taking maternity leave as they didn’t have three months of payslips and rejected newly promoted applicants as they weren’t in the job for a long enough period of time.

The bank lost support from mortgage brokers due to the time it would take to process applications and because of its stricter policies for approving loans.

The problem is that ANZ is more reliant on brokers as it has shuttered branches to cut costs, and while it has rectified many of these issues (not to mention hiring US celebrity David Hasselhoff to spearhead its latest ad campaigns), experts think it will be a long uphill battle for ANZ.

The Motley Fool’s #1 BANK STOCK for 2019

BRAND NEW! For a limited time, The Motley Fool Australia is giving away an urgent new investment report with all the details on our #1 BANK STOCK for the next 12 months and beyond…

Now, if you’ve been around this site for any length of time, you know The Motley Fool usually shuns bank shares.

But we’ve recently discovered a ‘hidden in plain sight’ bank stock with what we think is mouth-watering potential.

With the company boasting nearly 25% net profit growth every year for the last 5 YEARS…

And the shares paying a fully franked dividend that beats the pants off term deposits!

So if you like steady, high-growth income plays – we’ve got you covered!

You’re invited. Simply click the link below to discover our #1 ASX bank stock to profit in 2019. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.


More reading

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited and Commonwealth Bank of Australia. Connect with him on Twitter @brenlau.

The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019