Already down 7% in 2022, is the ANZ share price cheap?

Investors following the big four bank might be wondering the same.

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Key points

  • ANZ shares have taken a backward step in 2022, currently down 7% this year to date
  • Brokers are still constructive on the stock with half of analyst coverage saying it's a buy
  • In the last 12 months of trade, the ANZ share price has slipped 6% in the red

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is edging higher today, up less than 1% at $25.60.

After starting the new year higher, ANZ shares have fluctuated over the last few months of trade. Prices have gyrated between a high of $28.75 in January and a low of $24.82 in March, a 16% spread.

Is the ANZ share price cheap?

Analysts at investment bank JP Morgan are overweight on ANZ shares and are tipping more upside for 2022 with a $30.30 price target.

The broker affirmed its view in a recent note, highlighting its “greater certainty in ANZ’s top line (revenue)”.

“ANZ offers the greatest exposure to rising offshore rates, stemming from its NZ franchise, and its large institutional business,” analysts wrote.

“It also has a large relative exposure to business lending, which should provide some protection from the severe short-term pressure on mortgage margins. While mortgage growth has been disappointing of late, we expect a gradual improvement in line with improved processing efficiencies.

“We expect ANZ will return to out-cost in FY23 as investment spend normalises. Capital management potential is at the upper end of the major banks.”

Meanwhile, analysts at Bloomberg Intelligence have echoed JP Morgan’s sentiment at the top, but reckon there could be a risk to ANZ’s net profit guidance.

The pair of Matt Ingram and Jack Baxter at Bloomberg reckon that “ANZ’s fiscal 2022 adjusted profit may fall 8-10%, as impairments rise from 2021’s A$567 million write-back and 1H’s A$284 million”.

“Costs may stay high as ANZ said investments would peak in fiscal 2022 and subsequent declines could be booked as savings, given inflation will make other cost cuts tricky and the A$8 billion target tough to hit,” the pair added.

Checking analyst recommendations provided by Bloomberg data reveals that 50% of coverage has ANZ rated as a buy, whereas roughly 44% have it as a hold.

The remaining 6% of analysts covering ANZ urge their clients to sell their positions.

In the last 12 months of trade, the ANZ share price has slipped 6% in the red. It’s also down around 7% over the past month.

Motley Fool contributor Zach Bristow 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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