ANZ Group Holdings

The Business

ANZ is one of Australia's four major banks, which together hold around three-quarters of Australian home loans on our estimates, a structure protected by banking regulation that makes new entry extremely difficult. Unlike a pure retail lender, ANZ earns close to a third of its cash profit from an institutional banking arm spanning 29 markets, which we see as a point of difference from its domestic peers. Its $815 billion deposit base funds the loan book cheaply and stably. Suncorp Bank, bought in July 2024, is still being integrated, with customer migration to ANZ due by June 2027.

Recent Performance

ANZ reported its FY26 result (the year to 30 September 2026) on 9 November. Statutory profit rose 23% to $7,270 million and cash profit 31% to $7,591 million from $5,787 million, though much of that gain reflects an easy comparison: excluding roughly $1.1 billion of FY25 one-off charges that did not repeat, cash profit rose 10%. Cash earnings per share rose 29.7% to 252.6 cents (statutory 241.9 cents, up 22%), and the dividend was held at 166 cents, with the final 83 cents franked at 80%. Cash return on equity (profit per dollar of shareholder capital) rose to 10.65% from 8.09%, and return on tangible equity to 11.56% from 8.79%. The net interest margin eased 2 basis points to 1.53%. The cost-to-income ratio fell to 49.26%, from 58.82% reported and 53.42% excluding the one-offs, helped by $902 million of gross cost savings against an $875 million target. The credit impairment charge rose 32% to $582 million, 7 basis points of average loans, and the CET1 capital ratio ended at 11.99%, down 4 basis points.

Outlook

Revenue growth from here is expected to be modest, driven by loan volume as a slowly narrowing lending margin offsets some of that gain. Earnings growth decelerates meaningfully from the FY26 pace, as cost savings taper and credit losses normalise off FY26's unusually low base. Return on equity is expected to settle in the low double digits. The pace at which credit losses normalise, rather than whether they normalise at all, is the key variable to watch over the next two to three years.

Key Risks

The most consequential risk is a faster-than-expected credit cycle. Home loan arrears 90 or more days overdue have been rising, to 0.86% of Australian home loan balances at June 2026, from 0.83% at March, against a backdrop of softening house prices and unemployment at a multi-year high, and a move from FY26's unusually low loss rate toward more historically normal levels would compress provisions-adjusted earnings materially. A second risk sits in the bank's interest rate risk management: a sharp rise in risk-weighted assets tied to this exposure has consumed a material share of the capital buffer, and a scheduled change to a type of hybrid capital instrument in early 2027 adds complexity that, in a stress scenario, could pressure the dividend. A third, more modest risk is margin compression from intensifying deposit competition, which would erode the benefit the bank currently gets from its structural rate hedge.

What to Watch

• May 2027 First-half FY27 result — the next full test of whether loan arrears translate into higher provision charges or stay contained.
• 1-3 years Interest rate normalisation — a decline in risk-free rates would lower the return investors require of bank shares, though it would also reduce what ANZ earns on its interest rate hedges.
• FY28-29 Suncorp synergy delivery — progress against the bank's own cost and integration targets.

Latest Developments

The FY26 result confirmed cost discipline is real, not aspirational: savings beat guidance and full-time equivalent staff fell 7% to 39,172. Suncorp integration is progressing: $108 million of cost synergies have been realised since the acquisition, against management's $500 million target, and the integration program was 60% complete by activities at end-September 2026, with customer migration due by June 2027. Some attrition is visible, with Suncorp Bank lending down 1% and customer deposits down 3% over the year.

Company Description

ANZ operates through five main divisions. Australia Retail serves home loan and personal banking customers domestically. Business & Private Bank covers small and mid-sized business lending and private banking. Institutional banking, spanning 29 markets, provides transaction banking, markets and lending services to large corporates and generates close to a third of group cash profit, the largest share of any division, though its 1.32% return on risk-weighted assets is the lowest of the five. New Zealand banking operates as a standalone retail and commercial franchise. Suncorp Bank, acquired in July 2024, adds a Queensland-centred retail book still being folded into group systems.

Where the Growth Is

The clearest near-term earnings driver is cost transformation, not revenue growth. Management delivered $902 million of realised savings in FY26 against an $875 million target, cutting full-time equivalent staff 7% to 39,172. Suncorp synergies add a second layer: $108 million of cost synergies realised since the acquisition, against management's $500 million target for FY29. The cost-to-income ratio (expenses as a share of revenue) is trending down from 49.3% as these programs mature, a structural improvement rather than a one-off event, assuming integration continues on schedule.

Competitive Position

ANZ's market position rests on structural barriers rather than product differentiation. Four banks hold around three-quarters of Australian mortgage lending on our estimates, a concentration that regulatory capital requirements make very difficult for new entrants to challenge. The $815 billion deposit franchise funds lending at a cost competitors without equivalent scale cannot easily match. The institutional banking arm, spanning transaction banking and markets across 29 markets, is a genuine point of difference from its more domestically focused peers. We see this competitive position as stable and likely to persist for most of the next decade, though it protects margins rather than growing them, and ANZ competes within the oligopoly rather than dominating it.

Management & Capital Discipline

Capital allocation has been disciplined: a payout ratio around 66-67% of cash earnings, a dividend held at $1.66 a share through the FY25-FY26 transition, and a cost program that beat its own guidance. The Suncorp acquisition was a strategically logical extension of the retail footprint. The honest caveat is tenure: chief executive Nuno Matos has led the bank for less than two years and has not yet been tested through a genuine credit downturn, which matters given the credit normalisation we expect over the next few years.

Financial Position

The core (CET1) capital ratio was 11.99% at 30 September 2026, around 175 basis points above the regulatory minimum, after higher interest rate risk in the banking book took 52 basis points off it during the year. ANZ holds $4.53 billion of collective provisions, which it says is $2.1 billion more than its base economic scenario requires. On these measures, ANZ is well placed to absorb a moderate deterioration in credit quality without threatening the dividend.