If you're wanting exposure to the banking sector, then ANZ Group Holdings Ltd (ASX: ANZ) shares could be the way to do it.
That's the view of analysts at Goldman Sachs, which rate it as the best bank to buy right now.
What is the broker saying about ANZ shares?
Goldman highlights that it recently upgraded its recommendation on ANZ's shares due to the positive outlook for its institutional business. The broker is feeling a lot more confident about that call following the bank's recent institutional update. It explains:
On 28-Jun-23, we upgraded ANZ to Buy (on CL) based on our view that the improvement in the profitability of the Transaction Banking business within the Institutional division, which was due to a dramatic shift in mix towards higher returning Payments and Cash Management (PCM), was i) largely sustainable and ii) being underestimated by how the stock was trading.
With this in mind, ANZ recently held a timely update on its Institutional Payments & Platforms business, which reinforced these views.
Big returns on the cards
In light of the above, Goldman has reiterated its conviction buy rating and $27.55 price target on its shares. This implies a potential upside of 8.5% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends per share of $1.62 each year from FY 2023 through to FY 2025. This implies generous dividend yields of 6.4%, which boosts the total potential return to approximately 15%.
Goldman concludes:
We reiterate our Buy (on CL) on ANZ, given: i) we see further upside risk to ANZ Group returns from mix shifts in its Institutional division, ii) we still see current market competitive dynamics as a relative tailwind for Institutional NIMs, ii) our assessment of the profitability of this division concludes that these return improvements are largely sustainable, and iv) the stock is trading at a 29% discount to peers on 12-mo fwd PPOP, vs. 14% 15-yr average.
