Top broker downgrades ANZ and Westpac shares

ANZ and Westpac have seen their shares downgraded…

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Key points

  • ANZ and Westpac have been downgraded by analysts at Morgans
  • Both shares were previously buys but are now just rated as holds
  • Morgans cited near term concerns as the reason for the downgrades

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price is pushing higher on Thursday.

In afternoon trade, the banking giant’s shares are up 0.5% to $27.04.

This means the ANZ share price is now up 9% in the space of approximately seven weeks.

Where next for the ANZ share price?

Unfortunately for shareholders, one leading broker feels the ANZ share price may have peaked for the time being.

According to a note out of Morgans, its analysts have downgraded the bank’s shares to a hold rating and cut the price target on them to $26.00. This implies potential downside of 3.8% for the ANZ share price from current levels.

In addition, Morgans has downgraded Westpac Banking Corp (ASX: WBC) shares to a hold rating and slashed its price target down to $23.90. This compares to the current Westpac share price of $23.57.

Why did the broker make the move?

The note reveals that Morgans made the move amid concerns over near-term factors.

In respect to ANZ, the broker explained:

“Whilst ANZ’s Institutional business provides it with potentially strong leverage to rising rates, ANZ’s Australian home lending continues to disappoint in terms of growth. Moreover, it appears the limited growth ANZ is achieving is being driven by less complex, low-margin home loans. We consequently see risk of ANZ disappointing in the near term by way of loan growth and margin performance.”

As for Westpac, its analysts said:

“It has been disappointing to see that WBC’s Australian investor home loan book has continued to shrink post FY21 according to APRA statistics. We believe this contraction is being partially driven by WBC’s business bankers being focused on remediation issues; we had hoped these issues would be resolved by now. We suspect the remediation issues are also hampering WBC’s Australian business loan growth.”

“This is of particular concern in the near term as investor and business lending are two relatively high-margin areas of lending. We expect WBC’s share price to broadly track sideways until these issues are resolved.”

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 recommended Westpac Banking Corporation. 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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