ANZ's latest hybrid securities aren't bonds, aren't stock, and aren't worth investing in

Intelligent Investor

Independent Financial Research

ANZ's latest hybrid securities aren't bonds, aren't stock, and aren't worth investing in. When a banker offers you a hybrid security and 124 page prospectus, hold on to your wallet. Since all the hybrid securities we bought during the GFC have become overvalued, we've pretty much had a 'no hybrid' policy. ANZ's latest Capital Notes 3 are no exception. The 3.6-3.8% margin the Notes offer above the bank bill rate (currently 2.6%)looks appealing relative to term deposits and is far superior to the 2.8% margin offered by the most recent hybrid issue. Nonetheless, it's still inadequate compensation for the risk. Unlike deposits, the hybrids aren't guaranteed by the government so shouldn't be thought of as cash equivalents. The prospectus isn't joking when it says 'you would be one of the last classes of investors to be repaid, and so could lose your money'. Unlike senior bonds, the Notes only pay distributions that are at 'ANZ's absolute discretion', and unlike shares, have no claim on ANZ's future profits - which means next to no chance of capital gains. Read more (VIEW LINK)


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Independent Financial Research

Intelligent Investor is an independent financial research service with a 14-year history of beating the market. Our value investing approach empowers Australians to make more informed decisions to build their long-term wealth. We off structural...


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