Insights

ANZ shares downgraded after cost cutting plan abandoned

ANZ shares have been downgraded by Goldman Sachs…
The post ANZ shares downgraded after cost cutting plan abandoned appeared first on The Motley Fool Australia. –

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price could be close to being fully valued.

That’s the view of analysts at Goldman Sachs following the banking giant’s half-year results.

How did ANZ perform compared to expectations?

According to the note, ANZ delivered cash earnings ahead of the broker’s expectations thanks to lower bad debts. However, things weren’t quite as positive for its operating profit, which fell short of forecasts due to higher costs.

Goldman explained:

“ANZ’s 1H22 cash earnings grew by 4% on pcp, 5% ahead of GSe. In contrast, 1H22 PPOP came in -3% lower than GSe, as a stronger NIM performance was more than offset by higher operating expenses and weaker non-interest income. The proposed interim DPS of A72¢ implies a payout ratio of 65% (non discounted DRP), while the 1H22 CET1 ratio of 11.5% (18.0% globally-harmonised) was 26 bp lower than GSe, largely driven by the RWA impact of higher rates.”

What did Goldman say about the ANZ share price?

The note reveals that Goldman no longer sees sufficient value in the ANZ share price.

It has downgraded the bank’s shares to a neutral rating and cut the price target on them to $29.84. And while this still implies potential upside of 9%, Goldman sees better opportunities elsewhere in the financial sector.

Particularly given how ANZ has now effectively abandoned its FY 2023 $8 billion cost base target, which offered valuation support, and a couple of specific issues putting pressure on the bank’s performance.

Goldman commented:

“Today’s result highlighted a significant shift in ANZ’s cost aspirations, and our analysis suggests this is not just due to inflationary pressures, but also ANZ specific issues, including higher than previously anticipated investment spend requirements (that will also be expensed quicker), and lower than previously expected levels of productivity.

With our revised TP now implying only 9% upside, in the middle of our A&NZ Financials’ coverage, we downgrade to Neutral. For the sector, beyond the cost issues, we saw ANZ’s NIM result and rate leverage as more constructive than we had previously expected, and asset quality — and therefore provisioning — trends as benign.”

The post ANZ shares downgraded after cost cutting plan abandoned appeared first on The Motley Fool Australia.

Should you invest $1,000 in ANZ right now?

Before you consider ANZ, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and ANZ wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

5 things to watch on the ASX 200 on Thursday
Everything you need to know about the latest ANZ dividend
ANZ share price rises after half-year earnings beat
ASX 200 midday update: ANZ higher on results, Flight Centre and JB Hi-Fi sink following updates
Why ASX 200 bank shares are in the spotlight

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!