ANZ Group Holdings Ltd (ASX: ANZ) shares were strong performers in 2023.
Over the 12 months, the banking giant's shares rose approximately 9.6%.
In addition, the bank paid out a total of $1.75 per share in dividends, which equates to a sizeable 7.6% dividend yield.
Combined, this means that ANZ's shares delivered a ~17% return for investors over the 12 months.
Why did ANZ shares beat the market?
Investors were buying ANZ shares last year due largely to its strong performance in FY 2023.
For the 12 months ended 30 September, the big four bank reported a 14% increase in its cash earnings to a record of $7,405 million.
The key driver of this growth was its Institutional business, which reported a whopping 53% jump in cash earnings to $2,963 million for the year. It offset softer earnings in the bank's retail business, which continues to battle with intense competition for mortgages.
This ultimately allowed the ANZ board to increase its dividend by 20% in FY 2023 to 175 cents per share. Though, some of this increase relates to the bank's decision to pay a special dividend to make up for its final dividend only being partially franked.
Also giving ANZ shares a lift in 2023 was a broad market rally in December, which saw the bank's shares rise almost 6.5%.
Investors were flooding into the market last month en masse after inflation showed signs of finally being tamed.
This has sparked hopes that the Reserve Bank of Australia's rate hike cycle may now be over and rate cuts could be coming in 2024. This could support economic growth and reduce pressure on bad debts. Both would be good outcomes for ANZ and the rest of the big four banks.
