The Australia and New Zealand Banking GrpLtd (ASX:ANZ) share price is storming higher on Thursday. Here’s what this broker thinks…
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It certainly has been a positive day for the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price.
In afternoon trade, the banking giant’s shares are up 3.5% to $26.72.
This leaves the ANZ share price trading within sight of its 52-week high of $27.29.
Why is the ANZ share price charging higher?
Investors have been buying ANZ shares on Thursday following the release of its first quarter update this morning.
For the three months ended 31 December, the banking giant reported unaudited cash earnings from continuing operations of $1,810 million. This was an impressive 54% jump on the average of the last two quarters of FY 2020.
Also giving the ANZ share price a boost was news that the bank is reversing some COVID-19 provisions. Today’s update included a COVID-19 collective provision release of $173 million.
This represents ~10% of the $1,700 million set aside during FY 2020. Though, management may not be done there. At this point, it feels this release is prudent when balancing the improvement in the economic outlook at the end of the December quarter with the level of ongoing uncertainty.
This appears to hint that if things continue to improve, further releases could be made in the coming quarters.
How does this compare to expectations?
According to a note out of Goldman Sachs, ANZ’s cash earnings result was better than it was expecting. It notes that this was largely due to a significant outperformance in bad and doubtful debts.
The broker was also pleased to see that its pre-provision operating profit (PPOP) was running ahead of what its analysts were forecasting for the first half.
Another positive was the bank’s expenses, which were flat versus the second half quarterly average.
And finally, ANZ’s CET1 ratio of 11.7% is running well ahead of what Goldman is forecasting for the first half. It notes that this is being driven by better profitability and lower credit risk-weighted assets.
Is the ANZ share price in the buy zone?
Although the company is outperforming Goldman Sachs’ estimates, at this point, it still doesn’t see enough value in the ANZ share price to recommend it as a buy.
For now, the broker has retained its neutral rating and $24.43 price target.
Though, this could change in the coming days once the broker has had chance to fully digest the result.
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Motley Fool contributor James Mickleboro 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 Bruce Jackson.