ANZ share price rises after half-year earnings beat

ANZ’s half-year earnings were better than expected..

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Key points

  • ANZ 's shares are rising following its half-year results
  • The banking giant's cash earnings came in ahead of analyst estimates thanks to lower bad debts
  • ANZ's dividend was in line with expectations

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is pushing higher on Wednesday.

In afternoon trade, the banking giant’s shares are up 0.6% to $27.43.

Why is the ANZ share price pushing higher?

The catalyst for the rise in the ANZ share price today has been the release of a half-year result that revealed earnings ahead of the market’s expectations.

According to the release, the bank reported cash earnings from continuing operations of $3,113 million. This represents a 4% increase over the prior corresponding period but a 3% decline on the second half of FY 2021.

It was also well-ahead of what analysts at Goldman Sachs were expecting from the bank thanks to lower bad and doubtful debts (BDD).

Goldman commented: “ANZ reported 1H22 cash earnings (company basis) from continued operations of A$3,113 mn, which was up 4.1% on pcp and 4.6% ahead of GSe, with the beat driven by outperformance on the BDD charge.”

And while ANZ’s CET1 ratio, which fell 81 basis points to 11.53%, was softer than the broker was expecting, it hasn’t been enough to stop the ANZ share price from rising today.

Finally, ANZ’s fully franked interim dividend of 72 cents per share was in line with expectations.

Analyst call takeaways

Goldman Sachs also released a separate note with key takeaways from its analyst call.

Starting with a positive, ANZ spoke positively about its net interest margin.

Goldman said: “ANZ believes its solid 2H22 margin performance was achieved through discipline in new lending pricing through the half, as well as deposit repricing. While, price competition in AU and NZ remained intense, ANZ saw a material decline of flows into fixed rate lending through (26% in Mar-22 vs period average of 41%). “

A negative, which could impact broker valuations for the ANZ share price in the coming days, related to its cost base.

The broker advised that the bank is effectively scrapping its $8 billion cost base target by FY 2023.

It explained: “ANZ no longer believes the current environment is supportive of having an absolute cost target and so it is effectively walking away from its A$8 bn exit run-rate cost base by FY23E. Furthermore, ANZ expects its 2H22 costs to be about in line with 1H.”

“Management would not be drawn on where both run-the-business and investment spend will ultimately settle at but does expect that the extent to which investment spend is expensed will be more consistent with 1H22 levels (i.e. 88%) than historical levels (70-75%) given the nature of investment going forward will be less about building assets, and focus more on cloud-based enterprises.”

Are ANZ’s shares in the buy zone?

As things stand, Goldman Sachs sees a lot of value in the ANZ share price. It currently has a buy rating and $32.51 price target on the bank’s shares.

However, as mentioned above, once analysts have updated their financial models, this recommendation and valuation could change.

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 Scott Phillips.

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