Financial Analysis of ANZ Bank and Westpac Bank: A Comparative Report

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Finance for Business
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Table of Contents
Introduction.............................................................................................................................3
1...............................................................................................................................................4
2...............................................................................................................................................6
3...............................................................................................................................................9
4.............................................................................................................................................13
5.............................................................................................................................................15
6.............................................................................................................................................19
Conclusion............................................................................................................................21
References.............................................................................................................................22
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Introduction
The report above deals with the interpretation of the financial performance of ANZ bank
and Westpac bank. Both banks were considered as leading in Australia. There is a larger
stake of both banks with great market capitalisation and also engaged in both private and
retail banking. They have contributed for regulating of market economy of banks and their
infrastructure. Services are provided almost in all areas of banking such as debit cards,
credit cards, insurance, home loans, and private loans and so on. Westpac bank particularly
and specifically engages in the commitment of providing accessible information to also
disable people. In the report, various factors associated with banks and in order to know
about their profitability are measured. The weighted average cost of capital, ratios related to
liquidity and profitability are measured and also interpretation is done using graphs. In both
banks, human resource is considered as their key assets and also key objectives are to
ensure financial stability and to cater services to each and every section of society. They are
providing greater opportunities for newly engaged staff. Therefore, all major key aspects
are illustrated in the given report.
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1.
A brief report has been prepared considering to top banks of Australia mainly ANZ
Bank and Westpac bank of Australia.
ANZ Bank is considered to be the largest bank in terms of market capitalisation in
Australia. Also, operations in the Australian economy are making up the largest part of
ANZ business and with both commercial and retail banking dominating in market scenario.
As businesses are concerned in the banking sector it plays a major role in the economy.
ANZ is engaged in ensuring sustainability about business in order to overcome social,
economic and environmental risks and opportunities. ANZ is engaged in basically all types
of banking related functions and criteria. Primarily institutional and division services
related global institutional customer is catered for 3 main product sets: Transactions and
banking, loans and specialised finance and market are catered. In Australian division, it
mainly comprises retail and business of private banking units also. Human resource is
considered to be crucial for the said entity as day by day development of technology leads
to provide service digital, customer engagement and also human resource over there
transform ideas to solutions greatly to provide service to a larger customer group. ANZ is
giving customer-centric role including providing value-added services, customer marketing,
and services, events and counting of customer experience. It is constantly engaged in
innovation and design related to products and services and management. They are also
providing a platform to newly indulged human resource to work best in out of them and
also opportunities are created at a large level.
Westpac bank is also one of the leading banks in Australia and at the same time engaged
seriously in the commitment of providing of information that is accessible formats and also
making their products and services accessible by customers with a disability. Services that
may be provided by banks include credit cards, debit card, the opening of accounts and also
providing personal loans, insurance, home loans, reading of shares and so on. It also
provides 24 hours’ service and seven days a week. It is one of oldest company's and also
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the first bank of Australia. It is engaged in wide ranges of consumer, business and also
wealth management services, and have a portfolio of both financial services and brand
businesses. It is also working to enable its customers and communities to continuously
grow and prosper. Westpac has played a crucial role in regulating such a big economy like
Australia. At a different point of time various new offers, products, and services are
initiated to enable human's resource power to acquire them. One of the important objectives
of an entity is to ensure financial stability to each and every section of society whether
financially strong or weak. They are continuously engaged in providing consultancy
services for investment, loans, insurances and time for deposits, savings and also planning
for various life events that may accrue. There is uncertainty in each related to life,
therefore, it is important to be secure in advance and maintain and develop wealth. Both
banks ANZ and Westpac are important and crucial for sake quick development and
regulating of economies.
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2.
ANZ BANK
Particular 2016 2017 2018
current assets $m130663 $m126174 $m135988
current liabilities $m114789 $m86676 $m95116
cash $m66220 $m68048 $m84636
liquid assets $m63113 $m77354 $m119532
total assets $m914869 $m897326 $m942624
total liabilities $m856942 $m838251 $m883241
net assets $m57927 $m59075 $m59383
net profit $m5720 $m6421 $m6416
LIQUIDITY
RATIOS:
current ratio $m1.38 $m1.46 $m1.43
quick ratio $m.550 $m.892 $m1.26
cash ratio $m.577 $m.786 $m.890
PROFITABILTY
RATIOS:
net profit to total assets
ratio $m0062 $m.0071 $m.0068
earnings per share $m1.974p $m2.201p $2.216p
dividend per share $m1.60p $m1.60p $m1.60p
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Westpac bank
Particular 2016 2017 2018
current assets 75786 33513 93340
current liabilities 144225 190571 191029
cash 13045 18397 26431
liquid assets 144284 137797 153694
total assets 839202 851875 879592
total liabilities 781021 790533 815019
net assets 763416 818362 786252
net profit 7460 7997 8099
LIQUIDITY
RATIOS:
current ratio
0.5254
71
0.1758
56
0.4886
17
quick ratio
1.0004
09
0.7230
74
0.8045
58
cash ratio
0.0904
49
0.0965
36
0.1383
61
PROFITABILIT
Y RATIOS:
net profit to total
assets ratio
0.0088
89
0.0093
88
0.0092
08
earnings per share 224.6 238 237.5
dividend per
share 188 188 188
Liquidity position:
Liquidity position generally refers to the ability of a company to repay its obligations short
term over a period of time. It is one of important measure for examining the financial
position of the company. For investors and also internal management it is important to
know about the financial stability of companies over a period of time in order to aware of
steps that may be required to take in case of any deviations. The liquid position of a
company is generally defined as the difference between liquid assets cash flows basically
incoming on one side and outgoing cash flows resulting from various types of operations
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that are carried out. Liquidity position also interprets how the company's assets can be used
for sake of settlement of its current liabilities.
Current ratio, quick ratio, and cash ratio are generally used to determine liquidity position.
In the calculation of quick ratio, inventory is excluded as it is determined that inventory
takes time to be converted in cash. In the case of ANZ bank current ratio has declined and
also in Westpac it is declined. The quick ratio in case of ANZ bank has increased which
shows assets are converting in cash easily. In Westpac quick ratio has declined. Cash ratio
also acts as a measurement for determining liquidity and it is less than one in both ANZ and
Westpac. The liquidity position of both companies is not much satisfactory and there is a
need for improvement.
Profitability Ratios
Profitability ratio is important to measure to know about the ability of company's and acts
as financial metrics to able to generate earnings and good profit in relation to expenses. It is
crucial to know about the profitability of company also higher the ratio higher returns and
profits which in turn interprets that company's performance is up to mark and also doing
well in whatever business it is engaged. In a specific period of time company's faces, both
failure and success and both are concluded with profitability ratios.Net profits ratio is used
to determine profits with respect to total assets of the enterprise. Which shows how the
company's asset is able to generate more revenue and sales for it? In the case of ANZ bank
and Westpac net assets ratio is less than one which depicts what percentage of profit in
terms of assets is less. Also earning per share shows profits of company available to
allocate per share of the company and higher the ratio more earnings per share for
investors. Earnings per share of both companies are increasing which is beneficial for both
the company and investors. Also, dividend per share is constant in both companies.
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3.
Share price fluctuation
ANZ Bank and Westpac Bank
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B – Fluctuation in share price on all ordinary index
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Introduction
In the above graphical report of the ANZ Bank and Westpac Bank, it shows an analysis of
the brief relationship between the fluctuations in the market in the share price of the
Westpac Bank and ANZ Bank. Both the companies are listed on the Australian Stock
Exchange. The share price fluctuation of both the financial companies results in the supply
and demand of the market for the company. For the company's investors, it is very
important to analyse the fluctuation of the market price, as it helps the investors to analyse
their securities in relation to the particular portfolios. The share price of the Westpac Bank
and the ANZ Bank is represented in the graphical format in this report, which is compared
with the ordinary indexes to compute the performance of the bank with the current
industrial trend. The main reason for creating this report is to implement and formulate the
decision for the respective companies.
Analysis of the ANZ Bank
The market price of the ANZ Bank has increased in the financial year 2017 in comparison
to the financial year 2016. In the financial year 2018, the market price of the company has
reduced in comparison the financial year 2016-2017 average price fluctuation this shows a
positive rate of return for the investors if investing for a long time. But if the investors are
investing for a short period of time then the return are high in fluctuation and risky as it can
be seen that the financial year 2017 is having positive and high return in comparison to the
financial year 2016 and the financial year 2018 is also having low rate of return in
comparison to the financial year 2017 but positive if compares to the year 2016. From the
analysis, it concludes that the ANZ Bank is making a profit but not generating a sufficient
amount of profit for the shareholders of the company.
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Analysis of the Westpac Bank
The Westpac Bank is having the same situation as of ANZ Bank while analysing the report.
The market price of the Westpac Bank is lower in the financial year 2016 in comparison to
the financial year 2017. In the financial year, 2017 is more profitable for the investor and
for the company, because of its proper strategies and planning. But the financial year 2018
was not that good in comparison to the financial year 2017, as the market of the company's
share is going down. After analysing the market fluctuation of the company it can be
concluded that after the financial year 2015, company is sustaining in the market as the
financial year 2016 and 2018 and not one of the prominent years for the company in
comparison to the financial year 2017. The investor can invest in the company if it is
looking for a high return for the long term but for the short term the company is risky for
the investor, as the market price of the company is fluctuating rapidly.
Conclusion
From the above analysis of the report, it can be concluded that it is important for investors
to use market price for analysing the financial position of the company. In this short report,
it can be easily analysed that the ANZ Bank is more prominent for the investors in
comparison to the Westpac Bank, although the analysis was quite similar the ANZ Bank is
generating more profit than the Westpac Bank. Hence, investors should invest in the ANZ
Bank as it is providing higher returns in the future as it can be easily seen in the graphical
representation of the company’s data.
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