The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price has been a decent performer this week.
Since the end of last week, the banking giant’s shares have risen over 2%.
This means the ANZ share price is now up 11% over the last 12 months. This compares favourably to the ASX 200’s gain of 6% over the same period.
Can the ANZ share price go higher?
One leading broker has been running the rule over ANZ’s quarterly update from earlier this week.
And while it has trimmed its price target, it still sees decent upside ahead for the ANZ share price.
According to the note out of Morgans, its analysts have put an add rating and $30.00 price target on the bank’s shares.
Based on the current ANZ share price, this implies potential upside of almost 9% for its shares before dividends. And with Morgans forecasting a fully franked $1.41 per share dividend in FY 2022, the total return improves to approximately 14%.
What did the broker say?
Morgans wasn’t overly impressed with ANZ’s update but appears to have seen enough in it to maintain its add rating.
In respect to margins, it commented: “ANZ’s NIM, excluding Markets and notable items, contracted 5bps from 2H21 to 1Q22. The largest driver of this contraction is New Zealand home loan pricing, which we believe is the result of swap rates increasing faster than the interest rate increases on NZ fixed rate mortgages thus far.”
On the plus side, the broker notes that “ANZ’s update appears to support the view that the asset mix headwind from an increasing proportion of fixed rate home lending in Australia may now have peaked” and that the bank “appears to be experiencing less pressure on its Australian NIM relative to peers.” Though, it concedes that the latter could be due to ANZ “not achieving much growth in its Australian home loan book.”
Another positive that Morgans highlights is the bank’s capital position. It believes ANZ will have a significant capital surplus at the end of the year, which could bode well for share buybacks.
It commented: “ANZ has today said that its capital position continues to provide flexibility to return further surplus capital and ANZ is considering increasing the size of the current on-market buyback. We are forecasting ANZ to have surplus CET1 capital of ~$5bn at end-FY22F.”
The post Is the ANZ (ASX:ANZ) share price in the buy zone following its Q1 update? appeared first on The Motley Fool Australia.
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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 Bruce Jackson.
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