The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is down more than 1% today. That’s despite the ANZ CEO talking of expectations of an economic boom.
Australian households have collectively been amassing a large cash pile over the pandemic, with some spending categories being limited because of pandemic restrictions. The ANZ CEO Shayne Elliott thinks that there is a lot of pent-up demand as the cities of Sydney, Melbourne and Canberra exit lockdowns and enter the festive shopping season.
The Australian Financial Review quoted Mr Elliott, who said:
My view is that in the next six months we’re in for a bit of an economic boom. We know our customer base – we can see it – they’ve been saving money at a rapid rate. So people are sitting on really high savings balances and they’ve paid down debt.
We are entering into a period of freedom, travel and being able to do things and I think people psychologically feel that they’ve earnt it and they’ve earnt the right to go and do things.
The vaccination rates are so high that I think we’re exiting lockdowns into an economy that won’t really be interrupted by COVID, unless there is a new virus variant.
There is all the stimulus and savings built up during the NSW and Victoria lockdowns and limited labour supply, that I think the economy should have a cracking year in 2022.
Is the ANZ share price experiencing boom times?
As mentioned, it’s down more than 1% today and it has fallen more than 5% since the middle of August 2021.
ANZ recently reported its FY21 result, at the end of October 2021.
In that result, the big four ASX bank reported that its statutory profit after tax increased 72% to $6.16 billion, whilst continuing operations cash profit grew by 65% to $6.2 billion.
However, continuing profit before credit impairments and tax was almost flat, rising slightly to $8.4 billion. The continuing underlying profit before credit impairments, tax and large items was down 6% to $9.5 billion.
The headline numbers were boosted by the credit provision charge actually being a credit release of $567 million, compared to a charge of $2.74 billion in FY20.
ANZ explained that the Australian retail and commercial segments saw lending and deposits growth and delivered a “good margin performance” across the division. Home loan revenue growth was in the low double digits. However, second half volumes were impacted by a competitive refinancing market, customers paying down loans faster and “processing issues”.
The bank has been working on a range of improvements that are already having a “positive impact” on the processing times.
Lending indicators, such as loans that are over 90 days past due and deferrals have performed, better than the bank was expecting.
Dividends and capital
The big four ASX bank had a common equity tier 1 (CET1) capital ratio of 12.3%, which was around $6 billion above APRA’s unquestionably strong benchmark.
In August 2021, ANZ commenced a share buyback of $1.5 billion.
With the dividend, ANZ decided to more than double its annual payment, going from $0.60 per share to $1.42 per share. At the current ANZ share price, that represents a grossed-up dividend yield of 7.25%.
Do brokers think the ANZ share price is an opportunity?
Whilst there are several hold/neutral ratings on ANZ shares, a few brokers do think it’s a buy.
Morgans thinks ANZ is a buy, with a price target of $31. That implies a potential rise of around 10% over the next year, if the broker is right.
Based on the broker’s numbers, ANZ shares are valued at 12x FY22’s estimated earnings with an estimated forward grossed-up dividend yield of 7.5%.