On Wednesday, ANZ Group Holdings Ltd (ASX: ANZ) shares charged higher.
The banking giant's shares rose almost 2% to $29.05.
This was driven by the release of favourable inflation data and news that its acquisition of the Suncorp Group Ltd (ASX: SUN) banking operations is now complete.
Suncorp Bank acquisition completes
ANZ will be taking control of Suncorp Bank this morning after its acquisition of the Queensland-based operation finally complete more than two years since an agreement was reached.
ANZ Bank's CEO, Shayne Elliott, was delighted to complete the "strategically important acquisition." He commented:
Today is an exciting day for the ANZ Group, as we complete our acquisition of Suncorp Bank. This strategically important acquisition boosts our presence in Queensland, adds scale to our Retail and Commercial businesses, and means we can compete more effectively across the Australian market.
Tomorrow we will welcome the roughly 3,000 strong Suncorp Bank team and their 1.2 million customers into the ANZ Group. Suncorp Bank customers will continue to receive the same great service, from the same exceptional Suncorp Bank staff. Over time, we will make available to them ANZ's newest technology, giving them access to the very latest in banking services.
Completion of the acquisition followed the commencement of Queensland legislation amending the Metway Merger Act.
Should you buy ANZ shares?
Goldman Sachs has been running the rule over the acquisition and has now adjusted its earnings estimates to reflect the addition of the business. It commented:
Consistent with divisional policy, we cannot include the earnings of announced but not yet completed acquisitions. Therefore, with today's announcement, we integrate Suncorp Bank into our ANZ forecasts.
We note that we include all integration costs above-the-line (A$680 mn pre-tax, with majority incurred over a five-year period), and remind investors that ANZ expects synergies will be phased in over years 4 to 6 post completion with full run rate synergies expected to be achieved by the end of year 6 (full run rate A$260 mn pre-tax). Our FY24/25/26E EPS increase by 0.9%/5.8%/4.5%, with FY25E benefiting from the earlier pushing out of the timing of our cash rate cuts.
In light of the above, the broker has reiterated its buy rating with an improved price target of $29.10.
However, it is worth noting that this price target is largely in line with where its shares trade today. So, investors may want to wait for a pullback before considering an investment.
Commenting on its bullish view of ANZ shares, Goldman concludes:
We reiterate our Buy on ANZ, given i) we continue to see evidence of ANZ's ability to derive productivity benefits (A$201 mn in 1H24) and management noted there remains a large pipeline available which can be used to offset cost inflation. Furthermore, ii) we see upside for Group returns due to accretive mix shifts in the Institutional business towards higher ROE Payments and Cash Management business. Finally, the stock still trades at a c. 35% PER discount to the sector versus a 15-yr average discount 13%.
