Is the ANZ share price good value after dropping 9% from its high?

Let's see what Goldman Sachs is saying about the banking giant.

| More on:
A man looking at his laptop and thinking.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has been a tough few weeks for the ANZ Group Holdings Ltd (ASX: ANZ) share price.

Since peaking at $30.23 in the middle of July, the banking giant's shares have lost almost 9% of their value and currently trade at $27.65.

While this is disappointing for shareholders, has it opened up a buying opportunity for the rest of us? Let's see what one leading broker is saying.

Is the ANZ share price good value?

According to a note out of Goldman Sachs this morning, its analysts think investors should be snapping up the bank's shares while they are down.

In response to its capital position update, the broker has retained its buy rating on the banking giant's shares with an improved price target of $29.42.

Based on the current ANZ share price, this implies potential upside of 6.4% for investors over the next 12 months.

And with the broker forecasting partially franked dividends of $1.66 per share in FY 2024, FY 2025, and FY 2026, investors can look forward to receiving 6% dividend yields each year.

This means that the total potential 12-month return is approximately 12.4%. That's comfortably ahead of the historical average market return.

What is the broker saying?

Goldman has made only minor changes to its estimates following ANZ's capital position update. It explains:

ANZ today provided an update on its capital position following a series of adjustments to ANZ's Common Equity Tier 1 (CET1) arising from ANZ's acquisition of Suncorp Bank and other model and prudential changes. The incremental news in the announcement was that revised RWA methodology and model changes will result in a c. 30 bp improvement in ANZ's Level 2 CET1 ratio by 30-Sep-24. We make very minor EPS adjustments but given additional surplus capital, our TP moves to A$29.42 (from A$29.10).

There is no change to our investment thesis or Buy rating.

Speaking of which, its investment thesis is based on potential productivity benefits, the improving profitability of its institutional business, and upside risk to group returns. It summarises:

We are Buy-rated on ANZ given i) we are seeing evidence of ANZ's ability to derive productivity benefits (A$201 mn in 1H24) and management noted there remains a large pipeline available which can be used to offset cost inflation. Furthermore, ii) the improving profitability of ANZ's Institutional business remains a key driver of our positive investment thesis. We continue to see upside for Group returns due to accretive mix shifts in the Institutional business towards higher ROE Payments and Cash Management business. Finally, the stock still trades at a discount to the sector (ex-dividend adjusted).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Two brokers analysing stocks.
Bank Shares

Top broker upgrades NAB shares despite slim view on ASX banks

This broker likes NAB on relative valuation grounds, despite a soft sector outlook.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

ANZ shares aren't 'fundamentally cheap' says top broker

This broker says ANZ shares aren't as cheap as they seem on face value.

Read more »

a woman watches sand pass through an hourglass.
Bank Shares

Is now the time to sell CBA shares?

The bank's shares have started the year strongly, so what gives?

Read more »

Business people discussing project on digital tablet.
Bank Shares

Where will Macquarie shares be in 3 years?

What's the verdict for this banking giant?

Read more »

View of a business man's hand passing a $100 note to another with a bank in the background.
Bank Shares

Which ASX bank share will pay the best dividend yield in 2025?

Analysts expect some banks to pay more and others to pay less in 2025.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Bank Shares

Could the CBA share price really fall 30%?

This expert is the latest to predict a rough time ahead for CBA...

Read more »

A piggy bank sitting on the beach wearing sunglasses
Bank Shares

Were Bank of Queensland shares a winner in 2024?

Did owners of BOQ shares become richer in 2024?

Read more »

A female investor sits at her messy desk and marks dates in her diary for Zip announcements in 2022
Bank Shares

Here are the important dates impacting ANZ shares this year

Here are the dates to diarise for the new year.

Read more »