ANZ Group Holdings Ltd (ASX: ANZ) shares are having a flat day on Thursday.
The banking giant's shares are currently trading slightly lower at $27.53.
What's going on with ANZ shares?
The bank's shares are seemingly in a holding pattern this morning as the market digests the release of a capital position update ahead of a follow up analyst briefing this afternoon.
According to the release, ANZ has updated its capital position following a series of adjustments to its Common Equity Tier 1 (CET1).
This is arising from ANZ's acquisition of the banking operations of Suncorp Group Ltd (ASX: SUN) and other model and prudential changes.
What are the changes?
The first is previously advised model reviews of mortgage risk weights, which have now been approved by both APRA and RBNZ. Once fully implemented, the benefit of these model changes will be a ~$22 billion reduction in Advanced Internal Ratings Based Risk Weighted Assets.
Another relates to APRA approving ANZ's application of a revised framework (APS 112). The net benefit of these methodology and prudential changes will be ~30 basis points (bps) of Level 2 CET1 by 30 September 2024.
In addition, ANZ expects the impact of the Suncorp Bank acquisition to result in a reduction of 105 bps in Level 2 CET1.
It notes that this represents an improvement of approximately 18 bps relative to the pro-forma estimate announced at ANZ's half year results in May.
Should you invest?
Goldman Sachs is positive on ANZ shares and sees value in them at current levels.
The broker currently has a buy rating and $29.10 price target on the banking giant's shares.
It likes the bank due to its productivity potential and improving institutional profitability. It said:
We are Buy-rated on ANZ given i) we are seeing 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) the improving profitability of ANZ's Institutional business remains a key driver of our positive investment thesis. We continue to 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 discount to the sector (ex-dividend adjusted). Downside risks: Lending competition intensifies; a prolonged macro slowdown in Australia/NZ/Asia; higher for longer policy rates that reduce debt serviceability and lead to deterioration in ANZ's asset quality.
