Up 27% this year, is the ANZ (ASX:ANZ) share price still a buy?

Is the ANZ share price a buy despite rising 27% this year?

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has gone up 27% in 2021 alone, can it still be counted as a buy?

Just like the other big banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB), ANZ is seeing a recovery of economic conditions.

In the first half of FY21, for the six months to 31 March 2021, ANZ experienced a credit provision release of $491 million.

Statutory profit after tax for the half-year was $2.9 billion, up 45% on the previous half. Continuing cash profit was up 28% to $2.99 billion. However, cash profit for continuing operations before credit impairments and tax was down 10% to $3.94 billion.

The ANZ balance sheet continues to strengthen, with the APRA common equity tier 1 (CET1) ratio increasing to 12.4% at the end of the first half. That’s an increase from 11.3% at September 2020 and 10.8% at March 2020.

ANZ CEO Shayne Elliot said:

Following the trends of the first quarter, all parts of our business performed well. Costs were down 2% and we also increased investment in new digital capability that will provide ongoing productivity improvements and better customer outcomes.

Australia retail and commercial had another good half, becoming the third largest home lender in the market. Deposits performed well, with retail and small business customers behaving prudently by building solid savings and offset balances through the half.

Improving credit conditions resulted in a release of almost $500 million during the half. While the pandemic hasn’t resulted in large credit losses to date, we still have almost $4.3 billion in reserve if conditions deteriorate.

Capital generation was a feature which, along with our already strong balance sheet and prudent management through an incredibly volatile period, meant we were able to return our dividend to a level more in line with our target and sustainable payout ratio.

ANZ’s board decided to double the dividend to $0.70 per share.

But is the ANZ share price a buy now?

The broker Morgans is still bullish on the ANZ share price with a price target of $34.50 over the next 12 months. Both the dividend and profit were larger than expected. The broker thinks that the bank is doing the right things to lower its cost base.

On Morgans’ numbers, ANZ is valued at 13x FY21’s estimated earnings with a projected grossed-up dividend yield of 7.1%.

However, Morgan Stanley only rates ANZ shares as a hold, with a target price of $28 over the next 12 months. On the broker’s numbers, ANZ shares are trading at close to 15x FY21’s estimated earnings.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Bruce Jackson.

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