Leading broker says ANZ (ASX:ANZ) share price is a buy

Here’s why this broker likes ANZ’s shares…

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has run out of steam on Friday.

In afternoon trade, the banking giant’s shares are down almost 1% to $28.35.

Despite this, the ANZ share price is still up 23% since the start of the year.

Where next for the ANZ share price?

The good news is that one leading broker still believes the ANZ share price can rise further from here.

In response to the bank’s full year results on Thursday, the team at Goldman Sachs has retained their buy rating and lifted their price target on the company’s shares to $31.82.

Based on the current ANZ share price, this suggests there’s still 12.2% upside for investors before dividends.

And with Goldman expecting a $1.50 per share fully franked dividend in FY 2022, the total potential return stretches to approximately 17.5%.

What did the broker say about FY 2021?

Goldman Sachs was pleased with the bank’s performance during the second half of FY 2021. It notes that ANZ delivered a result well ahead of its expectations.

The broker said: “ANZ’s 2H21 cash earnings were up 37% on pcp to A$3,208 mn and 11% ahead of GSe, with the beat largely driven by a lower than expected BDD charge. 1H21 PPOP came in 6% higher than GSe, driven by higher trading income and a better-than-expected performance on NIMs, partially offset by higher expenses. The proposed final DPS of A72¢ implies a payout ratio of 63% (non-discounted DRP, to be neutralised) and 2H21 CET1 ratio of 12.3% (18.35% globally-harmonised) was 13 bp stronger than GSe.”

What about the future?

Goldman named a number of reasons why it remains bullish on the ANZ share price.

It explained: “Overall, we see today’s result as a positive and we maintain our Buy rating on ANZ given i) ANZ appears to be on track to reach its FY23 cost target of A$8 bn, which should alleviate some of its revenue pressures, ii) management notes capacity to drive better housing volumes has been expanded, and volume growth is evident across other parts of the balance sheet, iii) its Markets income has exhibited a positive divergence in trend versus peers, which ANZ attributes to a more diversified business that it expects can be sustained, iv) the stock is trading more than one standard deviation cheap versus the sector on PPOP multiples (27% discount vs. 11% 15-year average discount), and v) our 12-mo TP offers c. 17% TSR.”

This could make ANZ a share to consider if you’re looking for options in the banking sector.

Motley Fool contributor James Mickleboro 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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