The ANZ Group Holdings Ltd (ASX: ANZ) share price has seen significant volatility over the last month or so. During September, the S&P/ASX 200 Index (ASX: XJO) rose by 2.2%. The ASX bank share may have risen just 0.3% during September, but that doesn't tell the full picture.
As the chart above shows, the ANZ share price rose 4.9% in the first 20 days of the month and then dropped 4.4% to the end of the month.
Since that peak on 20 September, the ASX bank share has fallen by 5.6%.
Why was there so much volatility for ANZ shares?
There weren't any important market announcements during September. The most interesting thing announced by the bank was the market release, that it continues to buy back ANZ shares with its ongoing share buyback.
However, there was likely one key reason for the decline of the ANZ share price and the other major Australian financial institutions.
As I wrote last week, there appears to have been a rotation out of names like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ, into ASX mining shares such as BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Fortescue Ltd (ASX: FMG).
What caused this change? China has launched financial stimulus to help its economy, which has brightened the outlook for the iron ore price and ASX iron ore shares. Institutions seemingly decided to sell ASX bank shares so they could buy ASX mining shares.
The Australian Financial Review quoted Bell Potter strategist Richard Copplesonwho, who said:
These measures by China [were] a big shock to the market, but it's like a king-hit to the shorts – many have been completely blindsided by this who had been happily shorting every resource name they could, thinking it was easy money.
The 'long banks' story by institutional investors is likely to reverse – [Tuesday] probably marks the day that the long bank trade was terminated, banks have seen their highs.
What could happen next?
Without a crystal ball, it's impossible to know what will happen. We can only guess.
But I don't think investors should pay too much attention to short-term movements.
Two of the main considerations now are – what profit could ANZ generate, and is the valuation attractive?
ANZ's FY24 ended a few days ago. The bank plans to report its results on 8 November 2024.
UBS expects ANZ to grow its net profit to $7.8 billion in FY24. On UBS' estimates, the ANZ share price is valued at just under 12x FY24's estimated earnings.
However, the broker also thinks ANZ's profit will decline to $7.3 billion in FY25, which would put the current ANZ share price at just over 12x FY25's estimated earnings.
Overall, despite expectations of a lower profit in FY25, UBS rates ANZ shares as a buy with a price target of $32. This implies UBS thinks there could be a possible rise of around 6% over the next 12 months. Combined with the dividend, it could be a decent overall return if UBS is right, but I doubt ANZ will be one of the top performers in FY25 or the long term because of the competitive nature of banking and its already huge size.
