ANZ: Q1 Trading Update

ANZ's share price has fallen 2% after announcing its first quarter update for the period ending 31 December 2014 (ANZ has a 30 September year end). Underlying cash profit increased 3% compared to the same period last year, to $1.79bn.

Management highlighted that the quarterly bad debts charge of $232m was lower than the quarterly average for the full year in 2014, yet it was clearly shown at the end of the announcement that it was 21% higher compared to the same period last year. It's nothing to worry about given bad debts are at or near record lows, but changing comparison periods for different performance measurements shows a company trying to paint its results in a more favourable light.

As ANZ is more of a trading bank than its three major rivals it's been hurt a little from lower commodity prices, which has offset the benefit of the lower Aussie dollar. Deposit growth remains strong despite falling term deposit rates, and demand for mortgages in Sydney remains another bright spot despite our concerns about property prices. New Zealand is also performing well.

Mark Whelan has also been promoted to chief executive of Australia, replacing Philip Chronican after 32 years in the industry. Along with chief financial officer Shayne Elliott, Whelan will be in the mix to replace Mike Smith as chief executive. Smith joined the bank in October 2007 and last year announced he's planning to step down within two years.

This is another reason we prefer Commonwealth Bank and Westpac of the four major banks, in addition to their superior market shares in Australia and negligible ambitions abroad. But if you prefer ANZ's Asian expansion strategy and the stock has become a large part of your portfolio consider taking some profits as the share price increases. We've slightly increased the prices in the recommendation guide to reflect the passage of time, but we're sticking with SELL.