Are ANZ shares undervalued considering its FY25 outlook?

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

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ANZ Group Holdings Ltd (ASX: ANZ) shares have rallied over the past year, rising by 23.39%, compared to a rise of just 6.54% for the S&P/ASX 200 Index (ASX: XJO). Hence, investors may be wondering if FY25 could be another good year for the company.

ANZ's financial year doesn't follow the same calendar as most other companies or individuals. It finishes in September, so the outlook commentary can apply to the end of FY24 as well as FY25.

Three years ago, the Reserve Bank of Australia (RBA)'s cash rate was close to 0% and now it's 4.35%. This could have an important influence on the upcoming period.

HY24 result revealed rising cost-of-living challenges

ANZ recently reported its FY24 first-half result. It revealed it made $3.55 billion of cash net profit (down 1% compared to the FY23 second half), and it generated $3.4 billion of statutory net profit after tax (NPAT) (down 4% compared to the FY23 second half).

The ANZ CEO Shayne Elliott described the result as "strong", and attributed some of the performance to its "disciplined focus on productivity and delivery".

The ASX bank share boasted that its digital offering, ANZ Plus, had grown to almost 690,000 customers and was approaching $14 billion in deposits at the end of April. The net promoter score (customer satisfaction) was "consistently higher" than peers while attracting, on average, 35,000 customers every month, around half of which were new to the bank.

ANZ also said it had unlocked $200 million of savings through productivity measures during the period, making things simpler and delivering "enduring benefits" for the bank. That included further automation across home loan application processing and simplifying its technology.

The ANZ CEO noted while borrowers have generally remained resilient, there are "many who are challenged by rising cost-of-living".

The ASX bank share revealed that the Australian portfolio of home loans, which were at least 90 days overdue, had more arrears in March 2024 than in March 2023 or March 2022.

Subdued economies

ANZ is not expecting the Australian or New Zealand economies to bounce back in the short term. Elliott said:

Both the domestic and international environments are expected to remain challenging across the remainder of the year. The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally.

Despite these conditions, we are well positioned with the diversity of our businesses, prudent management, and the strength of our customers holding us in good stead. In fact, our work to build a well-managed, de-risked and diversified bank, coupled with our unique international presence, means we are well placed to succeed in this environment.

Profit forecast for ANZ shares

The broker UBS currently forecasts that the ASX bank share could generate net profit of $7 billion in FY24 and $7.3 billion in FY25. This suggests that FY25 net profit could increase by 4.4% year over year.

UBS has predicted that ANZ shares could, excluding franking credits, have a dividend yield of just under 6% in FY25.

The broker has a price target of $30 on the business, suggesting the ANZ share price could slightly rise over the next 12 months.

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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