Here is the earnings forecast through to 2026 for ANZ shares

Dividend investors will be keen to see what's on the horizon for ANZ.

| More on:
A woman standing on the street looks through binoculars.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Many investors hold ANZ Group Holdings Ltd (ASX: ANZ) shares for the juicy dividends they pay. However, the size of future dividends is largely dependent on the bank's profit. So just how much profit is ANZ expected to make in the next few years?

With a rapidly changing economic environment, and uncertainty surrounding inflation and interest rates, no one can know precisely how much profit the ASX bank stock will deliver in FY25 or FY26. But we can rely on ANZ's recent earnings updates and predictions from top brokers to gain a pretty good idea of what's to come.

Also to be considered is the fact that ANZ is looking to boost its scale and geographic diversification (particularly in Queensland) by buying the banking operations of Suncorp Group Ltd (ASX: SUN).

Let's dive into the outlook!

FY24

The bank recently reported its FY24 first-half result, which according to broker UBS, was largely in line with market expectations. Net profit after tax (NPAT) came in at $3.5 billion, down 1% half-over-half. ANZ benefitted from a stronger non-net interest income performance, supported by its loan book doing better than expected.

UBS said the $2 billion on-market share buyback was a "welcome positive".

However, there was a 9 basis point (0.09%) hit to the net interest margin (NIM) to 1.56%, which the broker said was a "negative overhang on the result". Excluding 'markets', ANZ's NIM declined 2 basis points (0.02%) to 1.63%.

After reviewing the results, UBS increased its FY24 profit forecast for ANZ by around 6%, but downgraded the FY25 and FY26 forecasts by 0.1% and 0.6%, respectively. The downgrades were due to higher cost expectations.

The broker is forecasting the bank could make $7 billion in FY24 and deliver earnings per share (EPS) of $2.29. This suggests ANZ is valued at around 12x FY24's estimated earnings.  

FY25

UBS is still forecasting FY25 will see a sizeable increase in profitability for ANZ shares, despite the challenge of rising arrears and lending competition.

The broker is suggesting ANZ's net profit can rise by more than $200 million to $7.2 billion. This would translate to the bank making EPS of $2.42. If this eventuates, it would mean the ANZ share price is currently valued at under 12x FY25's estimated earnings.

FY26

UBS suggests that ANZ's profit could rise again by around $500 million to $7.7 billion in FY26. This would mean the ASX bank stock could deliver EPS of $2.58, despite the broker's warning of higher costs than previously expected for FY26.

Based on those profit estimates, the ANZ share price is currently trading at under 11x FY26's estimated earnings.

Foolish takeaway

Whilst UBS tapered its profit forecast slightly based on the bank's most recent results, the outlook still looks pretty promising to me. If ANZ can deliver on the broker's predictions, I believe that the current share price trading at under 11x FY26's earnings seems like good value for ASX income investors.

Motley Fool contributor Tristan Harrison 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.

More on Bank Shares

Woman relaxing on her phone on her couch, symbolising passive income.
Dividend Investing

Here's how much passive income I'd get if I invested $20,000 in Westpac shares now

A $20,000 investment in Westpac shares could deliver some welcome additional passive income.

Read more »

Woman on her laptop thinking to herself.
Bank Shares

Are ANZ shares undervalued considering its FY25 outlook?

Do you know how much profit ANZ is forecast to make in FY25?

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Bank Shares

What's the outlook for the Westpac share price in FY25?

Top broker Goldman Sachs outlines three challenges for the ASX 200 bank in FY25.

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Broker Notes

Is the ANZ share price 'the best value of the major banks'?

ANZ shares are in the green today.

Read more »

A man looking at his laptop and thinking.
Bank Shares

'Attacked from all angles': Why this fundie is betting against the momentous rally in CBA shares

Up 27% in a year, this top fund manager believes the CBA share price rally is overdone. But why?

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Can owners of NAB shares bank on a good outlook for FY25?

Can NAB keep outperforming the market? The outlook is clouded.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

What is the outlook for CBA shares in FY25?

Can investors bank on another good year from CBA in FY25?

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank representing bank dividends and in particular the CBA dividend
Bank Shares

Here's how much I'd have if I'd bought 500 CBA shares 10 years ago

You won’t hear many long-term shareholders complaining about their CBA stock.

Read more »