Morgans expects stable asset quality, better-than-consensus net interest margins and a focus on absolute cost reduction to be supportive of sector return on tangible equity (ROTE). Consequently sector multiples are expected to be supported over the forecast period.
The broker continues to see capital management potential for each of the major banks. ANZ Bank is the analysts’ preferred major bank on a valuation basis. The Add rating and $34.50 target are maintained.
Target price is $34.50.Current Price is $28.09. Difference: $6.41 – (brackets indicate current price is over target). If ANZ meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges – negative figures indicate an expected loss).