ANZ Group Holdings Ltd (ASX: ANZ) has plenty happening behind the scenes.
The banking giant is working to simplify its operations, improve efficiency, and make better use of its position in the Australian and New Zealand markets.
But with interest rates rising and the economic outlook remaining uncertain, is now a good time to buy ANZ shares? Here’s my view.
Why I like ANZ shares
One reason I like ANZ shares is the variety of businesses it operates.
Alongside its Australian mortgage and deposit operations, ANZ has a substantial banking business in New Zealand and a well-established institutional division serving large companies across international markets.
I think that provides several opportunities to generate earnings and build stronger customer relationships.
But what interests me most today is the work management is doing to improve the business. ANZ has been implementing its ANZ 2030 strategy, which aims to simplify the bank, reduce costs, and improve customer experiences.
A significant part of this involves integrating Suncorp Bank and bringing customers onto ANZ’s existing systems. Management is targeting substantial annual cost savings from the integration, with the full benefits expected towards the end of the decade.
I think there is considerable potential here. If ANZ can reduce duplication, improve its technology, and operate more efficiently, it could generate stronger returns from its existing businesses.
That gives me a reason to be positive about its longer-term prospects.
What about the economic outlook?
The next year could still be challenging for ANZ.
Australian interest rates have been rising as the Reserve Bank attempts to bring inflation under control, with further increases possible.
Higher rates can help banks earn more from lending, particularly when their funding costs increase more slowly. But competition for mortgages and deposits can limit those benefits.
Higher borrowing costs can also reduce demand for new loans and put pressure on households and businesses. I think that helps explain why analysts are expecting relatively little earnings growth in the near term.
Consensus forecasts point to earnings per share of approximately $2.57 in FY26 and $2.55 in FY27. That is hardly an exciting outlook, but I think it is important to look beyond the next financial year.
The benefits of ANZ’s transformation should become more meaningful as its integration and efficiency programmes progress. For me, that provides an opportunity for earnings to improve over the following years.
Is the price reasonable?
ANZ shares are currently trading around $38.86. Based on consensus forecasts, that puts the bank on a price-to-earnings ratio of approximately 15 times FY27 earnings.
I think that is a reasonable price for a major Australian bank with opportunities to improve profitability.
There is also a healthy dividend on offer. Analysts expect ANZ to pay $1.66 per share in dividends in both FY26 and FY27, representing a dividend yield of approximately 4.3% at today’s price.
That provides some income while investors wait for the bank’s transformation to deliver results.
Foolish takeaway
I would be happy buying ANZ shares around $39.
I’m not expecting particularly strong earnings growth in 2027, but I think the work management is doing could leave ANZ in a much better position over the next few years.
With a reasonable valuation and a healthy dividend, I think there is enough on offer to make it worth buying today.
The post Is now a good time to buy ANZ shares? appeared first on The Motley Fool Australia.
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Motley Fool contributor Grace Alvino 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.