The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has risen by around 6% over the last six months.
Could there be more on the way?
ANZ's most recent result
For the first half of the 2021 calendar year, Australia was almost entirely COVID-19 free. The economy was recovering and ANZ was reporting a resurgence of profit.
In the first six months of ANZ's 2021 financial year to 31 March 2021, the big four ASX bank generated $2.94 billion of statutory profit after tax, which was an increase of 45% compared to the second half of FY20. Continuing operations cash profit increased 28% to $2.99 billion.
However, underlying profit (excluding credit impairment, tax and large items) fell 4% to $4.87 billion.
ANZ noted that 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, it still has almost $4.3 billion in reserve if conditions get worse.
Management said that lower revenue in its institutional business were largely expected due to the impact of falling interest rates as well as the normalisation of its market revenue after an exceptionally strong 2020.
The recovery of the headline profit allowed the ANZ board to increase the half-year dividend from $0.35 to $0.70 per share.
The ANZ share price fell 3.5% in the week after the release of this result.
Capital management
ANZ revealed in July 2021 that it intended to buy back up to $1.5 billion of shares on market as part of its capital management plan.
The ANZ Chair Paul O'Sullivan said:
Despite the very real challenges being experienced by many of our customers, we have the financial strength to continue to support our customers, while also returning surplus capital to shareholders. After reviewing options, we consider an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment.
Our capital position may allow future capital returns to be considered, however we will continue to focus on balanced and prudent outcomes for all stakeholders.
Is the ANZ share price worth looking at?
Morgans says that ANZ is a buy, with a price target of $34.50. That suggests the bank could rise by more than 20% over the next 12 months if the broker is right. The broker thinks there could be more capital returns to shareholders in time.
However, Morgan Stanley only thinks that ANZ shares are a hold with a price target of $28 whilst noting that the bank's capital position was a lot stronger. On Morgan Stanley's numbers, ANZ is valued at 15x FY22's estimated earnings.
