The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price will be in focus early next month when the banking giant releases its half year results.
Ahead of the release, let's take a look to see what the market is expecting from the bank.
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What is expected from ANZ?
The team at Bell Potter has been busy looking through industry data and has laid out its expectations for ANZ during the six months ending 31 March.
According to the note, the broker expects ANZ to report a first half cash profit of $2.84 billion. This will be down 5% from the $2.99 billion cash profit reported in the prior corresponding period and down 11% from the $3.21 billion reported for the second half of FY 2021.
Bell Potter explained: "While no cash NPAT figure was given in 1Q22, there is enough evidence to suggest things will continue to be bad until at least after 2H22. This is due to lower NIM in 1Q22 (-8bp, underlying -5bp, driven by lower full year exit rate and ongoing structural headwinds) despite some tailwinds in New Zealand and deposit price changes, and still poorer Markets business outcome in October (trading conditions to impact 1H22 performance)."
What about shareholder returns?
The broker is expecting ANZ to declare a 71 cents per share fully franked interim dividend. This will be 1 cent per share higher than last year and represents a 71% payout ratio.
As for other capital returns, Bell Potter isn't expecting any further share buybacks to be announced, though it sees scope for more in the future.
It commented: "As for Level 2 CET1, we forecast 12.3% in 1H22 but this will fall to 11.5% at the end of 2H22 mainly due to ongoing share buy-backs (and helped by organic capital generation of 0.4-0.8% p.a.)."
"While ANZ should continue to drive towards APRA's minimum requirement of 10.5%, we figure a benchmark of 11.5% would appear to be the norm. Medium-term, the buyback of $1.5bn still remains in place and the bank can take up a further $1.8bn (the difference between 12.2% and NAB's 11.75%, all else being equal)."
Are ANZ's shares in the buy zone?
Bell Potter isn't currently recommending ANZ shares as a buy.
The broker has a hold rating and $29.00 price target on them. This compares to the latest ANZ share price of $27.36, implying only modest upside potential of 6%.
