The Australia and New Zealand Banking Group (ASX: ANZ) share price is having a solid day of trade on Thursday. In early afternoon trade the banking giant’s shares are up 1% to $24.10.
This might be the start of even greater gains if one leading broker’s prediction proves accurate.
According to a note out of Goldman Sachs, it has retained its conviction buy rating and $31.52 price target on ANZ Bank’s shares after APRA’s chart pack for November revealed that business lending growth remains solid.
Goldman’s price target implies potential upside of almost 31% for its shares over the next 12 months. This stretches to approximately 37.5% if you include ANZ Bank’s dividend, which currently provides a trailing fully franked yield of 6.6%.
The broker was pleased to see that ANZ Bank’s business lending momentum remained solid in November. Its 3-month annualised growth to November was 1.4x the system average.
This managed to offset recent softness in housing loans. National Australia Bank Ltd (ASX: NAB) was the big winner in that department, growing its housing lending by 1.4x the system average. It also led the way with retail deposits, growing them at 1.1x the system average.
But this was still not enough for the broker to change its rating on NAB just yet. It remains neutral on the bank, albeit with a sizeable $33.24 price target.
ANZ Bank remains the broker’s preferred major bank exposure due to its view that it is best positioned to face into the sector’s slowing revenue environment.
This is because of its opportunities to deliver further absolute cost reductions, share buybacks, and its lower bad and doubtful debts charge.
In addition to this, its shares are changing hands at a lower than historic average price to earnings multiple and provide an above-average dividend yield.
Should you invest?
I agree with Goldman on ANZ Bank and believe it could be a great option for investors in 2019 along with fellow banking giant Westpac Banking Corp (ASX: WBC).
Incidentally, Goldman has a buy rating and $32.82 price target on the latter’s shares.
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.