ANZ shares have become the contrarian pick among the big four ASX bank shares.
Brokers have lined up to downgrade much of the sector this year, but Citi has taken the opposite view on ANZ Group Holdings Ltd (ASX: ANZ).
The reasoning has less to do with revenue growth and more to do with costs.
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Why Citi likes ANZ shares
Citi holds a buy rating with a $39.25 price target, which implied roughly 9% upside when the note was published.
ANZ has been the analyst favourite among the majors for much of 2026.
The bank has confirmed that it achieved 49% of its $800 million gross cost-savings target for FY26.
Revenue growth is hard to find across Australian banking right now, and so cost discipline is one of the few levers management can actually pull.
A bank that delivers on a stated savings target earns credibility the others have to argue for.
Australian banks also remain exceptionally well capitalised by global standards, though their dividends are not all fully franked.
A look at ANZ's recent earnings
The May half-year result highlighted ANZ's exceptional ability to manage its costs.
Cash profit came in at $3.78 billion against a statutory profit of $3,650 million, while return on tangible equity rose 161 basis points to 11.6%.
Operating expenses fell materially, reflecting organisational simplification and workforce restructuring, while operating income rose only modestly by comparison.
In other words, the profit improvement came from the cost line rather than the top line, which is a legitimate source of earnings but not an infinite one.
The interim dividend was 83 cents per share, franked at 75% and up from 70% in the prior half.
Group net interest margin averaged 1.53% across the half, and management has flagged a bias to the upside in margins excluding Markets in the period ahead.
Investors should note that the comparison is against a soft prior half, which flatters the growth rate.
The risks facing ANZ shares
The bull case is far from universally shared.
Morgan Stanley has sell ratings on CBA, NAB and Westpac shares, and the wider sector view among analysts has been cautious all year.
Broker consensus on this stock specifically has been split, with buy and sell calls roughly balanced earlier in the year.
The cash rate sits at 4.35% after three increases through 2026. Higher rates support margins in the near term but raise credit risk over time, and arrears typically lag rate rises by several quarters.
The bank also runs a September year-end, so the next full result is months away.
Foolish takeaway
The case for ANZ shares rests on execution rather than a sector-wide recovery.
If the company hits its $800 million savings target, earnings hold up without needing revenue growth. If ANZ misses, the discount to peers looks a lot less like an opportunity.
