The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is facing investor attention after the company reported its half-year results last week.
ANZ is one of the big four banks alongside Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), and National Australia Bank Ltd (ASX: NAB).
It is banking reporting season right now as every major bank releases a result or profit update. Macquarie Group Ltd (ASX: MQG) has also released its FY22 result recently.
Let's take a look at what the ANZ result might mean for investors and its share price.
HY22 earnings wrap
ANZ said its statutory net profit after tax (NPAT) grew by 10% to $3.53 billion. However, the continuing operations cash profit actually fell by 3% to $3.11 billion. The continuing operations cash profit before credit impairments, tax, and large/notable items fell by 10% to $4.14 billion.
The board declared an interim dividend of 72 cents per share.
ANZ said its total provision release was $284 million, compared to a release of $76 million in the second half of FY21. The ANZ share price edged 0.44% higher when the results were released last Wednesday but has ended each subsequent session in the red.
Meanwhile, the bank said it saw "positive" balance sheet growth in Australia which was driven by home loan processing capability. There was also "strong" home loan momentum in New Zealand which delivered market share growth.
ANZ explained that institutional customer revenue grew "strongly" with risk-adjusted lending margins expanding.
The big four ASX bank also said that costs were "tightly managed" with 'run the bank' expenses being flat for the half with the investment focused on "operational resilience" and new growth opportunities.
Recently, ANZ launched its new retail banking platform called ANZ Plus. It has also been working on improving its home loan processing capacity in Australia. The bank said it is on target to grow in line with the Australian major banks by the end of FY22, but will do so as it keeps an eye on its profit margins.
In terms of the loan book performance, ANZ revealed that customers are "generally emerging from the pandemic in a position of strength, with healthy balance sheets and low levels of arrears across key segments".
Management thoughts on the outlook
The ANZ CEO Shayne Elliot said:
Looking ahead, the economic environment is likely to be very different and we will continue to adjust our risk appetite, business setting and investment priorities as required. We are already seeing increased demand from our business customers and we are well placed to continue to support them as they manage in a world of higher inflation and interest rates.
For ANZ, we will continue to focus on the long term – investing for tomorrow and not just running today.
Is the ANZ share price a buy?
The ANZ share price ended Monday's session at $26.03.
Macquarie currently rates ANZ as a buy, with a price target of $29.50. While the half-year result didn't impress, the broker points out that interest rate hikes are expected to be beneficial for the net interest margin. Higher interest rates could be more useful to ANZ than other banks.
The broker Citi also rates ANZ shares as a buy, with a price target of $30.75. The end of its $8 billion cost goal means profit isn't likely to be as high as previously expected in the next couple of years. Citi also thinks that higher interest rates will help the bank.
At the current ANZ share price, Macquarie thinks the bank will pay a grossed-up dividend yield of 7.9% in FY22 and 8% in FY23.
Citi's projection for dividends means ANZ could pay a grossed-up dividend yield of 8.1% in FY22 and 9.3% in FY23.
