Top broker gives its verdict on ANZ's Suncorp Bank acquisition

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price remains out of action.

The banking giant's shares are currently in a trading halt until Thursday while it undertakes a $3.5 billion capital raising.

These funds will be used to acquire the banking operations of Suncorp Group Ltd (ASX: SUN) for $4.9 billion.

What are analysts saying about ANZ's Suncorp Bank acquisition?

This morning the team at Goldman Sachs gave their verdict on the Suncorp Bank acquisition.

According to the release, the broker sees both positives and negatives from the acquisition.

The positives are the expectation that the deal will be earnings per share accretive post synergies and boost to its domestic retail/commercial banking. Goldman said:

Strategically, the proposed acquisition somewhat improves ANZ's relative lack of scale in domestic retail/commercial banking. Based on APRA's monthly ADI statistics, ANZ's market share should increase c.2% in home lending and c.3% in retail deposits.

Whereas the negatives are the elevated operational risks associated with the delivery of the aforementioned synergies and competition concerns. Goldman explained:

We see operational risk as elevated, given i) management's expected A$260 mn of pre-tax synergies largely rely on getting SUN's 1.2 mn customers on to its still yet to be completed ANZ Plus platform, and ii) potential competition concerns.

This synergy assumption looks high versus previous in-market financial transactions, which tend to see 25-30% of the target's cost base as synergies.

Is the ANZ share price good value?

The note reveals that Goldman Sachs has held firm with its neutral rating.

However, even after trimming its price target by 8% to $27.44, this still implies potential upside of 27% for investors over the next 12 months. That's not bad for a neutral rating!

In addition, it is worth noting that Goldman hasn't incorporated the Suncorp Bank acquisition into its estimates. This will happen once the deal completes and could give its valuation a boost when it does.