ANZ (ASX:ANZ) Valuation in Focus After Regulatory Penalties and Sweeping Operational Overhaul

If you hold shares in ANZ Group Holdings (ASX:ANZ) or are considering a position, there is a lot to unpack right now. The bank has made headlines by agreeing to pay A$240 million in penalties after a string of regulatory failings, from mismanaging customer obligations to issues with bond trading volumes. Adding in a sweeping operational overhaul that will cut thousands of jobs and shuffle executive leadership, it is no wonder investors are weighing what all this means for the stock.

Despite a year marked by compliance challenges and strategic pivots, ANZ Group Holdings’ share price has managed to climb 11% over the past twelve months, showing solid momentum even as other large banks have faced similar pressures. Recent announcements, such as the plan to downsize its workforce by around 3,500 roles and the shift in risk management leadership, reflect a push to rebuild confidence and streamline the business, with a major strategy update just weeks away. The market seems to be pricing in both the costs of penalties and the potential benefits of a leaner, more focused bank.

After this eventful stretch, is the current price reflecting all the pain and progress, or does ANZ Group Holdings offer long-term value that the market is still discounting?

Most Popular Narrative: 6.5% Overvalued

According to the most widely followed narrative, ANZ Group Holdings is currently trading moderately above its fair value, after accounting for expected profit margins, growth, and risks at a 7.8% discount rate.

"The completion of the Suncorp Bank acquisition is expected to yield larger and earlier synergies than initially planned, enhancing scale and growth in Queensland. This should positively impact revenue and net margins. A significant shift towards a lower-cost, dual platform system with ANZ Plus and Transactive aims to improve efficiency, reduce costs, and allow faster roll-out of new products. This is projected to increase market share and positively impact net margins."

Ready to uncover what is really driving this "overvalued" label? The narrative hinges on big-ticket acquisitions and pivotal digital changes. Want to know what core assumptions could potentially justify the high share price, yet leave some analysts cautious? Dive into the narrative's forecasts and see how the next chapter for ANZ may not be as simple as it looks.

Result: Fair Value of $30.87 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent regulatory scrutiny and delays in realizing cost benefits from new digital platforms could quickly swing sentiment and challenge the current optimism.

Find out about the key risks to this ANZ Group Holdings narrative.

Another View: What Does the DCF Model Say?

To test the analyst expectations, we turn to the SWS DCF model, which evaluates ANZ Group Holdings based on future cash flows instead of market multiples. Interestingly, this approach results in a more optimistic valuation. Could these cash flow projections reveal deeper value than the market currently sees?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ANZ Group Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own ANZ Group Holdings Narrative

Feel free to challenge these conclusions, scrutinize the numbers for yourself, and craft a unique perspective of your own in just a few minutes. Do it your way

A great starting point for your ANZ Group Holdings research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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