The ANZ Group Holdings Ltd (ASX: ANZ) share price has gone through plenty of volatility this year. Is the ASX bank share now at an appealing level?
The banking sector is going through significant change at the moment, with the Reserve Bank of Australia (RBA) currently in a rate-cutting cycle. Management will need to decide how much of the rate cuts to pass on to savers and borrowers, which could impact their profitability and market share outlook.
Lower rates should decrease the risk of borrowers defaulting. However, rate reductions are likely to cut into what banks like ANZ can earn from no-interest transaction accounts (when they lend those funds to borrowers).
I'm going to look at three areas to help me decide if the ANZ share price is attractive.
Dividend yield
The major ASX bank shares are known for paying larger dividends, partly thanks to their lower price-earnings (P/E) ratio and partly because of a fairly generous dividend payout ratio.
The estimate on Commsec suggests that ANZ could pay an annual dividend per share of $1.68 in FY26. At the current ANZ share price, that translates into a forward dividend yield of 5.6%, or just over 7% including franking credits.
While that's not the biggest dividend yield on the ASX, I think it's attractive enough to like the bank for passive income.
Earnings valuation
ANZ has historically traded on a cheaper earnings multiple (or P/E ratio) than the other major ASX bank shares.
We don't have crystal balls to know what level of profit banks are going to earn, so estimates and projections are the best we can work with.
According to the forecasts on Commsec, the ANZ share price is valued at 12x FY26's estimated earnings. That seems fairly low when compared to its biggest competitor – the Commonwealth Bank of Australia (ASX: CBA) share price is valued at 27x FY26's estimated earnings.
Should CBA trade well over double the earnings multiple of ANZ when they're in the same industry and face similar trends, risks, and rewards? It's an intriguing question.
Growth?
For me, the key question is whether ANZ's earnings can rise at an adequate pace. I wouldn't want to invest in a business going backwards.
A low P/E ratio can be appealing if earnings are growing.
Currently, the Commsec forecast suggests that ANZ's earnings per share (EPS) could rise 5.7% in FY26, which is a fairly pleasing growth rate for a forward P/E ratio of 12, in my view.
I think solid growth of ANZ's EPS is quite possible considering the most recent update, which was the FY25 half-year result.
In that report, ANZ revealed (on a cash basis) revenue rose 5%, expenses grew 4%, underlying cash profit increased 6%, and actual cash profit rose 12% to $3.57 billion. It also revealed that gross loans and advances increased 2% to $824 billion, and customer deposits grew 6% to $756.6 billion.
While ANZ wouldn't be the first ASX share I'd buy today, I think it looks more appealing than others in the sector.
