ANZ earnings outlook 'weaker than peers': Morgan Stanley
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The news: Morgan Stanley has warned that ANZ's near-term earnings growth outlook is weaker than its big four peers, and expects the lender's upcoming second-half result to trigger reductions to consensus earnings-per-share forecasts.
The numbers: ANZ shares last closed at $31.59, having grown more than 20% since January. Morgan Stanley has an 'underweight' rating on the big four bank with a price target of $27.50.
Morgan Stanley analysts expect net interest income growth of 2% half on half. They forecast the bank's margin to fall 1 basis point (bp) to 1.55% in the second half compared to the first, with mortgages down 2 bps, funding and deposits down 2 bps, and hedging up 3 bps.
The context: Morgan Stanley analysts said its 'underweight' thesis was driven by a "weaker-than-peer" near-term earnings outlook.
They also flagged execution risk from retail bank migration to ANZ Plus, weaker growth outlook in New Zealand than Australia, and "unsustainably low" loss rates with less scope than peers for provision releases.
The analysts noted that ANZ's remediation plan following allegations of misconduct at the bank is likely to increase cost growth.
However, the analysts said that ANZ benefits by having a more diversified business mix than its major bank peers, a "sound" capital position, and a lower credit risk profile following a change in the group's business mix and risk appetite.
The source: Morgan Stanley research
