Why this top broker says ANZ shares can deliver 10%+ returns in FY25

ANZ shares could deliver market-beating returns, according to one broker.

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ANZ Group Holdings Ltd (ASX: ANZ) shares may be able to deliver a double-digit return over the next year or so, according to UBS.

The ASX bank share can usually provide a pleasing dividend return, but based on the latest broker price target, this could combine with capital growth to deliver a potentially market-beating performance.

ANZ shares have already risen by 26% in the last 12 months. It has outperformed the S&P/ASX 200 Index (ASX: XJO), which has only gone up by around 9% in the same timeframe. It's possible that the bank could continue to outperform based on UBS' projections.

Potential ANZ share price growth

A price target is where a broker thinks the ANZ share price will be in 12 months. Remember though, brokers don't have a crystal ball; it's just where they think the valuation will go.

While ANZ shares are neutral-rated by UBS, the broker has a price target that suggests possible gains.

The broker thinks the ANZ share price can rise to $30, which would be an increase of 4.2% from today's level.

UBS has predicted the ASX bank share could generate earnings per share (EPS) of $2.29 in FY24 and then achieve 5.7% EPS growth to $2.42 in FY25, partly thanks to the recently-announced $2 billion share buyback, which results in sharing the profit generated between fewer shares on issue.

Dividend potential

Amid elevated competition in the ASX bank share space, rising arrears and weakening net interest margins (NIMs), UBS believes ANZ's dividend yield (excluding franking credits) could be 5.9% at the current ANZ share price.

A dividend is not guaranteed, but it's paid from the profit generated by a business. ANZ could still make enough profit in FY25 to pay a large enough dividend for investors to be rewarded handsomely.

Total shareholder return

The potential ANZ share price rise and the possible dividend yield suggest a total shareholder return (TSR) of just over 10% in FY25, which could be a market-beating return.

The Vanguard Australian Shares Index ETF (ASX: VAS) tracks the S&P/ASX 300 Index (ASX: XKO), an index of 300 of the largest businesses on the ASX. Over the five years to April 2024, the ASX 300 returned an average of approximately 8% per annum. If the VAS ETF delivers an 8% return in FY25, the ASX bank share could achieve a stronger TSR based on UBS' numbers.

Other ASX shares may deliver even stronger returns than ANZ shares over the next year or two, but UBS is predicting a decent level of return for ANZ by the end of FY25.

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.

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