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ANZ GROUP FPO [ANZ] ANZ.AX

Latest Deep Dive · Written · AI research note

Bro's Verdict
Deep Dive

Rating

HOLD

Confidence

65%

Target Price

A$36.00

Upside

-6.2%

Horizon

medium

ANZ trades at ~15.1x NTM P/E, a 99% premium to its two-year average, with historical multiple bands implying fair value of $19-$32 and a consensus target of $35.43, both below the $38.39 spot. The 20% forward EPS growth is a low-base rebound leaning on volatile institutional and markets income, while home loan applications fell 12% QoQ and NIM faces persistent mortgage competition. With a 4.45% yield and benign credit preventing a short call, the $36 target implies ~6% downside, warranting a Hold with adds on a pullback to $33-$34.

Executive Summary

•ANZ trades at ~15.1x NTM P/E on the revised $2.54 NTM EPS, a 99% premium to its own two year average of 7.6x (+2.6 SD), leaving the stock priced for a full earnings recovery that is not yet proven.
•Historical P/E, EV/EBITDA, EV/Rev and P/BV bands imply fair value of $19 to $32, all below the $38.39 spot, and the consensus target of $35.43 sits ~8% below spot, so both relative and absolute signals point to limited near term upside.
•Forward EPS growth of 20% and a 4.45% dividend yield are the offsets, but the growth is a low base rebound leaning on volatile institutional and markets income, while home loan applications fell 12% quarter over quarter.
•The swing factors are NIM defence against mortgage price competition, NZ and Pacific margin and provisioning trends, and whether capital strength translates into sustained buybacks and dividends.

Financial Snapshot

•Revenue (TTM): $21.52b
•Net income (TTM implied): ~$5.9b
•Operating margin: 48.8%
•Net margin: 27.4%
•ROE: 8.2%, below the major bank peer group
•EPS (NTM consensus): $2.54, revised up from an earlier $2.06 snapshot
•Dividend yield: 4.45%
•Net debt / EV: 0.25x
•CET1 ratio: Not disclosed
•Net interest margin: Not disclosed
•Quarterly net income: $1.32b (Q4), $1.49b (Q2)
•Home loan applications: down 12% quarter over quarter

Forward Outlook

•NTM EPS revised up to $2.54 from the earlier $2.06 snapshot, a ~23% upgrade reflecting a stronger institutional and markets run rate.
•Consensus revenue ~$23b, implying mid single digit growth off the $21.52b TTM base.
•Consensus EBIT $9.92b with EBIT growth of 14.6% year over year.
•EPS growth of 20% year over year, driven by a low base and cost discipline rather than revenue acceleration.
•Consensus DPS supports the 4.45% yield, though the DPS field is not reliable in the supplied data.
•Home loan applications down 12% is a leading indicator of mortgage volume pressure into the next print.
•Margin trajectory: NIM expected to stay under pressure as mortgage repricing and competition offset any funding cost relief.

Valuation Analysis

•NTM P/E: ~15.1x (on $2.54 NTM EPS)
•NTM P/E (ASX sheet, stale $2.06 EPS): 18.63x
•NTM P/S: ~4.5x (on ~$23b forward revenue)
•NTM EV/EBIT: 14.42x (Bloomberg)
•NTM EV/EBIT (BF methodology): 9.3x
•TTM P/E: ~17.6x
•TTM P/BV: 1.6x vs two year average 1.3x (+1.0 SD, +21% vs average)
•BF P/E: 15.1x vs two year average 7.6x (+2.6 SD, +99% vs average)
•BF EV/EBITDA: 8.7x vs two year average 6.2x (+0.4 SD, +41% vs average)
•BF EV/Rev: 4.5x vs two year average 3.0x (+0.5 SD, +49% vs average)
•BF EV/EBIT: 9.3x vs two year average 25.7x (-0.3 SD); the historical average is distorted by extreme dispersion (SD 59.9) and is not a reliable anchor
•Implied price at historical average P/E: $19.29
•Implied price at historical average EV/EBITDA: $28.37
•Implied price at historical average EV/Rev: $27.08
•Implied price at historical average P/BV: $31.66
•Consensus target price: $35.43 (~8% below spot)
•Fair value estimate: $36, blending historical multiple reversion with forward EPS support
•CBA: ~23.7x TTM P/E, $258.3b market cap, premium franchise, sector's highest multiple
•WBC: ~17.1x TTM P/E, $120.1b market cap, cheapest of the majors
•NAB: ~19.6x TTM P/E, $120.2b market cap, business banking skew
•MQG: ~25.9x TTM P/E, $96.0b market cap, capital markets earnings mix
•ANZ: ~17.6x TTM P/E, $103.7b market cap, mid pack on peers but at a premium to its own history

Key Risks & Catalysts

Risks

•NIM compression from intense Australian mortgage price competition.
•Home loan applications down 12%, signalling volume headwinds ahead.
•Institutional and markets earnings are volatile and can reverse sharply, making the 20% EPS growth fragile.
•Valuation at a 99% premium to the two year average P/E leaves no margin for error.
•Consensus target below spot implies negative near term analyst sentiment.
•NZ and Pacific provisioning could rise if economic conditions soften.
•ROE of 8.2% lags peers, limiting relative appeal.
•CET1 not disclosed, so buyback and dividend sustainability cannot be verified from the supplied data.

Catalysts

•Continued NTM EPS upgrades (from $2.06 to $2.54) if institutional momentum holds.
•Capital strength supporting buybacks and dividend sustainability.
•Benign credit conditions with low arrears supporting provisioning releases.
•External audit tender and AGM resolutions in late 2026 sharpening governance focus.
•4.45% dividend yield becomes more attractive if rate expectations shift lower.

Investment Thesis

ANZ is a solid franchise trading at a stretched valuation relative to its own history. At ~15.1x NTM P/E it sits at a 99% premium to its two year average of 7.6x, and at 1.6x book it is 21% above its two year average. The reliable historical bands, P/E, EV/EBITDA, EV/Rev and P/BV, imply fair value of $19 to $32, all below the $38.39 spot, and the consensus target of $35.43 reinforces that the market has already priced a full recovery. On peers, ANZ's 17.6x TTM P/E is mid pack, so the stretch is against its own history rather than the sector.

The bull case rests on 20% forward EPS growth and a 4.45% yield. But that growth is a low base rebound leaning on institutional and markets income that is inherently volatile. Meanwhile home loan applications are down 12%, NIM faces persistent mortgage price competition, and NZ and Pacific margins and provisioning remain most exposed to any economic softening. With ROE at 8.2% lagging the majors, the relative case is weak.

Recommendation: Hold with a $36 price target, roughly 6% below spot. The stock is not a short given dividend support and benign credit, but the premium multiple and below spot consensus target cap upside. I would look to add on a pullback toward $33 to $34, where the valuation reconnects with its own history and the yield becomes more compelling.

Written by Buy Side Bro's AI analyst from financials, consensus, filings and recent news. General information only, not financial advice.

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