Why this analyst ranks ANZ shares at the bottom of the big-four-bank pile

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is not attractive to some analysts.

The reasons why investors are not jumping on ANZ shares could partly explain why the ANZ share price is down 18% in 2022.

ANZ is one of the big four ASX bank shares alongside Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

But, the bank’s decision to try to buy the banking operations of Suncorp Group Ltd (ASX: SUN) has put ANZ’s operational difficulties under the spotlight.

What’s going wrong with ANZ?

The Age reported on the recent changes in market share of the big four banks, according to Macquarie Research and APRA in July 2022.

NAB is the only major bank to achieve a higher market share over the past 12 months. But, ANZ’s loss of housing market share sticks out like a sore thumb. ANZ’s market share of housing dropped by more than 100 basis points over 12 months to July 2022, meaning its market share reduced by more than 1%.

The newspaper reported that at the end of last year, ANZ’s processing times for a home loan application had reached 51 days. Macquarie Group Ltd (ASX: MQG), which wants to grow Macquarie Bank, had a loan turnaround time of around a week. ANZ says things are getting better.

But, The Age quoted a former employee that questioned ANZ about this. That employee reportedly said:

I don’t understand why it has taken them so long to fix it.

Is the Suncorp acquisition the answer?

ANZ wants to buy the banking operations of Suncorp Group Ltd (ASX: SUN) for $4.9 billion.

This acquisition includes $47 billion of home loans with a “strong risk profile”, $45 billion in “high-quality” deposits and $11 billion in commercial loans.

At the time, ANZ CEO Shayne Elliott said:

With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger more balanced bank for customers and shareholders.

This is a growth strategy for ANZ and we will continue to invest in Suncorp Bank and in Queensland for the benefit of all stakeholders.

One analyst puts ANZ as his least favourite big four ASX bank share. The Age quoted Jefferies Brian Johnson, who said:

Perhaps they’re too motivated by trying to have a bigger market share figure in housing than the shareholder value it creates.

You haven’t seen their market share improve. Their mortgage servicing is yet to actually improve, and they’ve abandoned their $8 billion cost target for 2024.

He also reportedly is “unimpressed” by ANZ Plus.

Time will tell whether the deal is approved by the ACCC and how much it adds (or not) to ANZ’s earnings per share (EPS).

In the recent ANZ FY22 third quarter update, it said revenue was up 5% in the three months to 30 June 2022, while the net interest margin (NIM) increased by 3 basis points and the underlying NIM improved by 6 basis points. Rising interest rates are expected to be “supportive” for margins in the fourth quarter, according to ANZ.

ANZ share price snapshot

Compared to a month ago, the ANZ share price is almost unchanged.

The post Why this analyst ranks ANZ shares at the bottom of the big-four-bank pile appeared first on The Motley Fool Australia.

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More reading

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• Could this pose a risk to the ANZ share price in the future?
• ANZ share price on watch following equity raising update
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Motley Fool contributor Tristan Harrison 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 recommended Westpac Banking Corporation. 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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