The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price looks set to end its positive run on Wednesday.
In afternoon trade the banking giant’s shares are down 1.5% to $20.69.
This follows an impressive 36% gain for the ANZ share price in the prior three weeks.
Why is the ANZ share price dropping lower today?
Investors have been selling the bank’s shares after analysts at Goldman Sachs called time on its impressive rally.
According to the note, the broker has downgraded ANZ’s shares from a buy rating to neutral and placed a price target of $20.02 on them.
The broker made the move on valuation grounds after its strong share price gain meant there was virtually no upside for shareholders over the next 12 months including dividends.
Goldman commented: “ANZ only offers 1% TSR, which sits towards the bottom of our Australian retail bank stack, and so we move to Neutral. Since we added ANZ to our Buy List on 22 March 2020, ANZ is up 31% versus the ASX-200 Accumulated Index up 25%; the ASX-200 Bank Accumulated Index up 19% and ASX 200 Index up 28%.”
Though, the broker has suggested there is scope for it to lift its price target in the future if three factors play out favourably.
The broker added: “We would become more constructive on ANZ if (i) it can achieve its A$8bn cost base target by FY22E (not currently reflected in GSe/Consensus forecasts), (ii) better-than-expected repricing of its institutional lending portfolio, and (iii) there is a quicker-than-expected recovery in housing volume momentum.”
But until that happens, it will be focusing on other banks. This includes Bank of Queensland Limited (ASX: BOQ), which it upgraded to a buy rating today.
It notes that the regional bank is trading at a significant discount to its peers based on historical multiples.
Goldman has placed a $7.17 price target on Bank of Queensland’s shares. This represents potential upside of approximately 12% including dividends.
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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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