If your portfolio lacks banking sector exposure, then now could be the time to pounce on ANZ Group Holdings Ltd (ASX: ANZ) shares.
With the banking giant's shares down approximately 10% over the last three months, the team at Citi appear to believe a buying opportunity has opened up for investors.
Particularly given that ANZ shares are the broker's top pick in the banking sector right now.
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What is Citi saying about ANZ shares?
According to a recent note, the broker has a buy rating and $26.50 price target on the bank's shares.
Based on its current share price of $23.58, this implies potential upside of 12.4% for investors over the next 12 months.
And with Citi expecting ANZ shares to provide investors with 7% fully franked dividend yields through to at least FY 2025, the total 12-month potential return on offer here stretches to almost 20%.
Why is ANZ its top pick?
When reviewing the bank's recent half-year results, Citi revealed why it thinks investors should choose ANZ above other big four banks. It said:
ANZ reported 1H23 cash earnings of $3,821m, in-line with market expectations. However, unlike its recent reported peers, this result was well-received, despite ANZ facing the same competitive pressures on both sides of its balance sheet. We see ANZ having two key advantages for the current environment: 1) a strong deposit franchise finally showing its strength; and 2) a large weighting to Institutional banking.
These advantages are inextricably linked. We have lowered our forward NIM estimates to reflect the industry competition pressure, but the profile shows a more modest decline. Cash EPS estimates are unchanged in FY23, down 7-8% in FY24/25, with our longer-term ROE of 10.5% thereafter remaining intact. This leaves a more modest 3% TP reduction to $26.50. We see ANZ's unique capabilities as set to deliver relative outperformance in the current market conditions. ANZ is our preferred Major Bank exposure.
All in all, this could make ANZ a top option to consider if you're lacking banking sector exposure.
