Morgans does not expect the additional provisions stemming from the Royal Commission to hamper the ability of the major banks to achieve APRA’s unquestionably strong CET1 benchmark by January 2020.
From this perspective, the broker is comfortable with ANZ’s announcement of $374m in charges for customer remediation brought to the accounts in FY18. The broker reduces estimates for cash earnings per share by -7.0% as a result of the announced charges.
FY19 and FY20 estimates are reduced by -0.3% and -0.8% respectively, because of share buyback estimates reducing by -$800m. Morgans upgrades to Add from Hold, viewing the recent share price weakness as overdone. Target is reduced to $28.50 from $30.00.
Target price is $28.50.Current Price is $27.04. Difference: $1.46 – (brackets indicate current price is over target). If ANZ meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges – negative figures indicate an expected loss).