On Wednesday, shares of ANZ Group Holdings Ltd (ASX: ANZ) experienced a notable increase, rising nearly 2% to $29.05. This boost followed the release of positive inflation data and the completion of ANZ's long-awaited acquisition of Suncorp Group Ltd’s (ASX: SUN) banking operations.
Suncorp Bank Acquisition Finalized The acquisition of Suncorp Bank by ANZ has been finalized, marking the end of a process that took over two years from the initial agreement. The completion of this acquisition is seen as a strategic move to enhance ANZ's presence in Queensland, increase scale in its Retail and Commercial businesses, and improve competitiveness across the Australian market.
ANZ’s CEO, Shayne Elliott, expressed enthusiasm about the acquisition, highlighting its significance. Elliott stated that the integration of Suncorp Bank into ANZ will strengthen the group's position in Queensland and offer new opportunities for customers. The approximately 3,000 employees of Suncorp Bank, along with its 1.2 million customers, will join the ANZ Group. While maintaining the existing level of service, ANZ plans to introduce its advanced technology to these customers over time.
Analysts' Perspective on the Acquisition The integration of Suncorp Bank into ANZ’s operations has prompted analysts to update their earnings estimates to reflect the addition of the new business. Analysts have noted that the acquisition's integration costs will be substantial, with an estimated A$680 million in pre-tax costs expected to be incurred over a five-year period. They anticipate that full run-rate synergies, projected at A$260 million pre-tax, will be realized by the end of the sixth year.
In terms of earnings projections, analysts have revised their estimates for ANZ’s future earnings per share (EPS). For FY24, FY25, and FY26, EPS estimates have been adjusted upward by 0.9%, 5.8%, and 4.5%, respectively. This adjustment reflects the expected benefits from the acquisition and changes in the timing of cash rate cuts.
Future Outlook for ANZ Shares The completion of the Suncorp Bank acquisition is expected to enhance ANZ's productivity and financial performance. Analysts remain optimistic about ANZ's potential to generate productivity benefits and manage cost inflation effectively. Additionally, there is anticipated upside for the Group’s returns due to a shift towards higher return-on-equity (ROE) business segments within the Institutional division.
Despite the positive outlook, it is noted that ANZ's shares are currently trading close to the adjusted price target. This may suggest that investors could benefit from waiting for a potential pullback before making investment decisions.
The acquisition is viewed as a strategic move that could bolster ANZ's market position and financial performance in the coming years.