Shares in Australia and New Zealand Banking Group Ltd (ASX: ANZ) are inching higher and now trade less than 1% in the green at $28.29.
After trading sideways for the best part of a year, the ANZ share price gathered support in December in line with broad sector strengths and fund flows into ASX financial shares.
Despite this, analysts covering the ASX financials universe at JP Morgan reckon that ANZ will deliver the weakest credit growth amongst all the banking majors in 2022.
In its report covering the outlook of the ASX financials sector in 2022, the broker highlighted that ANZ might be in for some challenges with this key growth metric. Here are the details.
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Will ANZ lag its peers in credit growth?
Firstly, in its assessment of the market mechanics for 2022, JP Morgan expects that overall Australian housing credit growth should slow in 2022, given "building headwinds" and a shifting interest rates regime.
The broker notes that most banks have already begun increasing their fixed lending rates. Not only that, but the firm says that APRA is likely to apply more macro-prudential authority, which it thinks "will likely target highly indebted borrowers (i.e. debt-to-income > 6x)".
Not only that, but housing affordability seems "increasingly stretched" given the level of house price growth in 2021, placing further stress on first-home-buyer demand.
Yet, despite these challenges to the sector, JP Morgan anticipates the majors will "grow their housing books at 5.5% in FY22 (based on system growth of ~7%), while non-housing will be slightly weaker at ~4%".
Yet, it also notes that credit growth rates between the banking majors are unlikely to be even in FY22. The firm reckons that Commonwealth Bank of Australia (ASX: CBA) will lead the pack in terms of credit growth, forecasting circa 7-8% in housing and non-housing credit growth for FY22, followed by National Australia Bank Ltd. (ASX: NAB) at around 5–6%.
However, the firm expects that ANZ is poised to deliver the weakest credit growth in FY22 across both divisions, "particularly given its issues in Australian housing".
The firm forecasts around 3% housing credit growth in FY22 for the bank and around 2% non-housing credit growth for the same period.
But it's not all doom and gloom for the banking giant, says JP Morgan. The broker reckons the compressed growth should shift and then "build towards improved growth in FY23 as it focuses on turnaround times".
It notes ANZ's language from 2021 on relevant guidance for the upcoming year, where the bank says "at some point in the second-half, we should be growing in line with our major bank peers".
Looking out to FY23 and FY24, the broker sees a mild recovery in ANZ's credit growth, but still lagging most of its peers in that regard.
JP Morgan remains neutral on the direction of the ANZ share price but values the company at $30 per share.
ANZ share price snapshot
In the last 12 months, ANZ has gained 17% after climbing another 3% in the past month alone.
Shares have started the year well and have pushed 3% higher since January 1.
