Is the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price worth looking at with June 2021 in mind?
It wasn't too long ago that the big four ASX bank released its FY21 half-year result to the market.
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Was the HY21 report solid?
In the first half of FY21, ANZ reported that its statutory net profit after tax (NPAT) of $2.94 billion was 45% higher compared to the second half of FY20.
Continuing operations cash profit was up 28% to $2.99 billion. However, continuing cash profit before credit impairments and tax was down 10% to $3.94 billion.
ANZ explained that the headline profit figures were materially up because the total provision in the first half was a net release of $491 million.
Despite the ongoing uncertainty, the credit provision release was a result of the improving economic outlook over the course of the half, as well as some loan volume reductions. Home loan and small business customers have behaved prudently by building savings buffers through the half, according to ANZ.
That net release of $491 million was comprised of a collective provision release of $678 million, combined with an individually assessed provision charge of $187 million. The big bank explained that the low individually assessed provision reflected the continued impact of government and bank support packages through COVID-19, as well as its long-term strategy and disciplined focus on customer selection in 'institutional'.
At 31 March 2021, the collective provision balance was around $4.3 billion, representing additional reserves of $909 million compared with pre-COVID levels at 30 September 2019.
Despite a volatile environment with significant demand from customers, the bank was able to reduce the cost of operations thanks to streamlining and automation, while processing record volumes.
At the time of the ANZ result, the CEO Shayne Elliot said:
ANZ is in a strong position both financially and operationally. We are well capitalised and our disciplined approach to costs over many years has us well placed to invest in opportunities to grow our business in targeted segments. The work to digitise core processes and platforms continues at pace and this will be more visible to customers towards the end of the year.
Is the ANZ share price an attractive opportunity?
One of the latest brokers to have their say is Macquarie Group Ltd (ASX: MQG). It pointed out that core earnings, excluding the provisions, continues to decline. The broker believes that banks are looking at costs so much because growing revenue is hard.
For Macquarie, its target for the ANZ share price over the next 12 months is $30.50, which suggests a possible capital return of just under 10%.
However, the broker is expecting that the ANZ dividend will recover to $1.40 per share in FY21. That translates to a grossed-up dividend yield of 7%.
At the current ANZ share price, Macquarie thinks the bank is valued at around 15x FY21's estimated earnings.
