If your portfolio lacks banking sector exposure, then now could be the time to pounce on ANZ Group Holdings Ltd (ASX: ANZ) shares.
With the banking giant's shares down approximately 10% over the last three months, the team at Citi appear to believe a buying opportunity has opened up for investors.
Particularly given that ANZ shares are the broker's top pick in the banking sector right now.
What is Citi saying about ANZ shares?
According to a recent note, the broker has a buy rating and $26.50 price target on the bank's shares.
Based on its current share price of $23.58, this implies potential upside of 12.4% for investors over the next 12 months.
And with Citi expecting ANZ shares to provide investors with 7% fully franked dividend yields through to at least FY 2025, the total 12-month potential return on offer here stretches to almost 20%.
Why is ANZ its top pick?
When reviewing the bank's recent half-year results, Citi revealed why it thinks investors should choose ANZ above other big four banks. It said:
ANZ reported 1H23 cash earnings of $3,821m, in-line with market expectations. However, unlike its recent reported peers, this result was well-received, despite ANZ facing the same competitive pressures on both sides of its balance sheet. We see ANZ having two key advantages for the current environment: 1) a strong deposit franchise finally showing its strength; and 2) a large weighting to Institutional banking.
These advantages are inextricably linked. We have lowered our forward NIM estimates to reflect the industry competition pressure, but the profile shows a more modest decline. Cash EPS estimates are unchanged in FY23, down 7-8% in FY24/25, with our longer-term ROE of 10.5% thereafter remaining intact. This leaves a more modest 3% TP reduction to $26.50. We see ANZ's unique capabilities as set to deliver relative outperformance in the current market conditions. ANZ is our preferred Major Bank exposure.
All in all, this could make ANZ a top option to consider if you're lacking banking sector exposure.
