The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has dropped by around 15% since 30 May. It closed yesterday's session down 2.23% to $21.93.
How are things looking for 2023?
The 2022 financial year has just finished for most businesses and individuals, however, ANZ has a different financial calendar that ends on 30 September.
While ANZ's FY22 may not have finished, it could be a useful idea to think about what could happen in the short to medium term for the bank.
ANZ is one of the big four ASX banks alongside Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC).
However, just because it's a big four bank doesn't mean that it can't suffer sizeable share price falls and be impacted by the wider economic environment.
Let's look at what could happen over the next year.
Acquisition talk
In just the past few days, ANZ confirmed that it was in discussions with private equity group KKR about potentially buying the accounting software business MYOB. ANZ told the market that it hasn't reached an agreement yet with KKR and there is no certainty it will proceed.
However, if it did it is possible that it could help ANZ's business division by working more closely with business customers.
Another acquisition that ANZ is interested in is the banking division of Suncorp Group Ltd (ASX: SUN), according to reporting by the Australian Financial Review (AFR).
ANZ reportedly has a team talking to Suncorp about its banking division, which could potentially be put up for sale. The deal could add "scale at a time when it has struggled to catch up to its larger rivals."
How much scale? It would add $60 billion in customer loans, with around 80% of that being mortgages. It would also geographically add more exposure for ANZ to the markets of Queensland and NSW.
What's dragging on the ANZ share price?
ANZ and other banks have seen their share prices drop after the latest moves by the Reserve Bank of Australia (RBA) to increase interest rates.
It may be strange to see that the banks are suffering when lower interest rates were supposedly hurting their profitability.
As Macquarie and other brokers have pointed out, while higher interest rates should help the banks' net interest margins (NIM), the problem is that if interest rates go too high too quickly, it could lead to rising arrears and bad debts, which would detract from profits.
What are the brokers' thoughts on the ANZ share price?
A price target indicates where a broker thinks a share price will be in 12 months from now.
Macquarie currently rates ANZ as neutral with a price target of $23.50. As mentioned, it's concerned about potential impairments and how higher interest rates will impact growth.
The broker Morgan Stanley is currently equal weight on the big four ASX bank, with a share price target of $24.30. It also recognises that bad debts are likely to increase.
However, Ord Minnett is more positive on the bank with a price target of $28.30. It's positive about the prospect of a rising NIM.
All of these brokers are expecting sizeable dividends from ANZ.
For example, Ord Minnett has projected a grossed-up dividend yield of almost 10% in FY23.
