Macquarie Group Ltd (ASX: MQG) has run the ruler over the big four banks and believes the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price represents the best upside relative to its big four peers.
Big banks lifting the ASX 200
The resurgence of the big four banks in 2021 has helped offset the weakness in other sectors including healthcare, materials and information technology. Without the support of the big four heavyweights, the ASX 200 would find itself in negative year-to-date returns.
A significant decline in bad debt and impairment coupled with a strong property market has helped propel banks to near pre-COVID highs.
The Commonwealth Bank of Australia (ASX: CBA) share price has been the weakest performer among its peers, up ~3% year to date and within ~6% of its February 2020 highs.
The National Australia Bank Ltd (ASX: NAB) share price is up ~13% year to date and also within ~6% of where it was a year ago.
The Westpac Banking Corp (ASX: WBC) share price has surged the most, running ~23% this year, and ~7% shy of its February 2020 levels.
The ANZ share price is the first big four bank to top its pre-COVID highs and has run ~21% higher year to date.
The ANZ share price to outperform
Macquarie notes that the ANZ share price has re-rated since the beginning of the year, but offers more upside than its peers on a relative basis. Moving forward, the broker expects the bank to continue to perform better than its counterparts and deliver comparably better results.
Macquarie retained an outperform rating for ANZ shares on Wednesday and raised its target price from $28.50 to $30.00. This represents an upside of ~7.50% from the current ANZ share price of $27.90.
What about the other banks?
On the same day, Macquarie commented that stretched valuations and longer-term headwinds have made it difficult to be bullish on banks. The broker has pivoted its preference from major banks to regional banks with the exception of ANZ.
It viewed the CBA share price as neutral with an $81.50 target price, or downside of ~5% from its current price of $86.00. While the Westpac share price was also neutral rated with a $25.75 target price or an upside of ~6.5%.