It's worthwhile examining ANZ Group Holdings Ltd (ASX: ANZ) shares following the recent Commonwealth Bank of Australia (ASX: CBA) results because we may be able to gather useful understandings of the ASX bank share industry.
While they are two separate businesses, they operate in the same industry and largely offer the same services to customers.
ANZ is not quite as large as CBA, though it did recently become materially bigger after acquiring Suncorp Bank from Suncorp Group Ltd (ASX: SUN).
Let's remind ourselves of some of the most important aspects of the CBA result and then consider if the ANZ share price is a buy.
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CBA result highlights
In the FY24 result, CBA reported its cash net profit after tax (NPAT) declined by 2% to $9.8 billion.
The net interest margin (NIM) dropped by 8 basis points year over year to 1.99%. However, interestingly, CBA reported its NIM increased by 1 basis point in the second half of FY24 compared to the first half of FY24.
Operating income was flat while operating expenditure rose by 3%. The ASX bank share said expenses rose due to higher inflation impacting staff costs and additional technology spending.
Pleasingly, the CBA loan impairment expense decreased, reflecting its "robust credit origination and underwriting practices, rising house prices, and lower expected losses within consumer finance."
CBA's annual dividend was increased by 3% to $4.65 per share.
At the current CBA share price, it's trading at around 23x FY24's earnings.
Are ANZ shares a buy?
The broker UBS is expecting ANZ's cash net profit to drop as CBA's did in FY24.
CBA's stabilisation of its NIM may be a sign that the worst of the competition is over. However, CBA did make a conscious decision to tactically manage the relationship between margin and growth. I'd be surprised if ANZ's NIM performed as well as CBA's because it has been focused on growth.
UBS suggests that ANZ has been slowly but steadily regaining its market share since September 2022 and if it could return to the 2018 level of 15.8% it could provide "significant upside to revenue".
However, I do think CBA's pleasing performance with its loan impairment expense may be at least partially applicable to ANZ because of the strength of the Australian economy and rising house prices.
One of the best things about ANZ, according to UBS, is its institutional bank. In UBS' words:
We believe ANZ remains the largest and strongest bank in the institutional banking product segment among the majors and we think it is well placed to benefit from potentially higher volatility and volumes in FY24.
The broker thinks ANZ's earnings per share (EPS) could grow at a compound annual growth rate (CAGR) of 3.6% over the next three years, which is actually faster than what UBS thinks CBA's EPS will grow by.
On the face of it, ANZ shares seem like better value than CBA shares, though there is a question mark about whether the ASX bank share could suffer due to the government bond trading scandal.
According to UBS' estimates, ANZ shares are trading at under 12x FY25's estimated earnings with a dividend yield of more than 6%. Those statistics are much more appealing than CBA's.
