SKN | Are ANZ Shares Good Value? Two Valuation Lenses Investors Use

Key Points

• ANZ trades around A$36, close to fair value under simple bank valuation models.

• A sector-adjusted P/E approach implies modest upside versus current levels.

• A dividend discount model suggests the stock is broadly fairly priced.

• Balance-sheet quality and loan growth remain critical swing factors beyond headline multiples.

ANZ Banking Group are trading near A$36, putting the stock squarely in focus for income-oriented investors assessing whether Australia’s major banks still offer value after a strong multi-year run. Below are two standard valuation frameworks commonly used by analysts when assessing large ASX-listed banks.

These approaches are indicative rather than definitive, but they help frame whether a stock looks expensive, cheap, or fairly valued relative to its fundamentals.

Valuation Lens One: Price-to-Earnings Comparison

The price-to-earnings (P/E) ratio compares a company’s share price with its most recent full-year earnings per share. For banks, this remains a commonly used relative valuation tool given the sector’s mature earnings profile.

Using ANZ’s current share price of approximately A$36.21 and FY24 earnings per share of A$2.15, the stock trades on a P/E multiple of roughly 16.8x. That compares with an estimated Australian banking sector average closer to 19x.

Applying a simple mean-reversion framework, ANZ’s earnings multiplied by the sector-average multiple implies a sector-adjusted valuation of around A$40 per share. On this measure alone, ANZ appears modestly undervalued relative to peers, though not dramatically so.

Valuation Lens Two: Dividend Discount Model

Given the stability of bank dividends in Australia, many investors also rely on a dividend discount model (DDM), which values a stock based on the present value of expected future dividends.

Using ANZ’s most recent full-year dividend of approximately A$1.66 per share and assuming modest long-term dividend growth, analysts typically apply a range of discount (risk) rates to reflect uncertainty. Under blended assumptions using risk rates between 6% and 11%, the DDM produces a valuation range clustered around A$35–36 per share.

Using a slightly adjusted dividend assumption of A$1.69 lifts the implied valuation closer to A$35.70, broadly in line with the current market price.

Interpreting the Results

Taken together, the two models suggest ANZ is trading close to fair value. The P/E comparison hints at some upside if sector valuations hold, while the dividend-based approach implies the stock is already pricing in much of its income appeal.

This convergence is typical for large Australian banks, which are widely held for dividends rather than rapid capital growth.

What Matters Beyond Simple Models

While these valuation tools are useful reference points, they are incomplete on their own. For bank stocks, investors also need to assess balance-sheet risk and earnings durability.

Key areas to monitor include loan growth trends, credit quality and provisioning, funding mix between deposits and wholesale markets, and the trajectory of net interest margins as rate expectations shift. Small changes in these variables can have an outsized impact on bank valuations, particularly when stocks are already priced near long-term averages.

Bottom Line

At current levels, ANZ shares appear reasonably valued rather than obviously cheap or expensive. For income-focused investors, the decision is likely to hinge less on valuation multiples and more on confidence in dividend sustainability, credit discipline, and funding costs as the interest-rate cycle evolves.

For a confidential discussion on how Australian bank valuations, dividend sustainability, and balance-sheet risk can be assessed within a broader portfolio strategy, contact our senior advisory team.