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What is the outlook for the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price in 2022?
Whilst 2021 isn't finished, the big four ASX bank has had a decent year. Since the start of the year, it has gone up 19% whilst the S&P/ASX 200 Index (ASX: XJO) has risen by approximately 9%. An outperformance of 10% is material over one year.
Several weeks ago, ANZ released its FY21 result for the 12 months to September 2021 where it made statutory profit after tax of $6.16 billion (up 72%). However, cash profit from continuing operations, before credit impairments and tax, was $8.4 billion, which was flat compared to last year.
A significant part of the result related to its credit quality, where the total provision for FY21 was a net release of $567 million.
The credit provision release was due to a combination of factors, with changes to the portfolio volume, mix and risk profile occurring throughout the year, and the economic outlook improving.
But that's the past. How are things shaping up for 2022?
ANZ's progress and outlook
ANZ says it's making good progress in its multi-year transformation, investing in group-wide automation, cloud migration and digitisation to enable low cost, sustainable customer growth.
It wants to be able to offer the public a compelling digital offering which will help drive long-term customer and revenue growth. Higher revenue could be a boost for the ANZ share price.
The ANZ CEO Shayne Elliot said:
We have our eye on the long-term opportunity and made significant progress and these investments, known internally as ANZx, will become more visible to customers into 2022.
New Zealand is expected to continue to deliver robust returns and maintain its strong market position.
Institutional is now a better-balanced, more predictable and higher returning business. We are in a strong position to take advantage of the structural tailwinds we believe will impact institutional banking, particularly in a rising interest rate environment and the build out of our banking platforms business. Changes from the implementation of APRA's proposed capital reforms are also likely to be a further tailwind for institutional.
ANZ is also looking to sustainable financing as one of the mega-trends that will impact the global economy over the next few years.
The big four bank thinks that the real impacts of COVID-19 will not be fully understood until at least the end of 2022.
What do brokers think about the ANZ share price?
Morgans is quite optimistic on the bank, with a buy rating and a price target of $31. It thinks that ANZ will benefit from rising interest rates, though strong competition remains.
The broker thinks ANZ is going to pay a large dividend yield over the next couple of financial years. In FY22 it is expected to pay a grossed-up dividend yield of 7.7% and then 8.6% in FY23.
Based on the broker's estimate, the ANZ share price is valued at 12x FY22's estimated earnings.
Other brokers are less bullish. Credit Suisse is neutral on ANZ, with a price target of $28.50. Credit Suisse is expecting a little lower dividend and earnings in FY22 compared to Morgans.
