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ANZ's Q1 Profit Surged 75% - So Why Is the Share Price Still 8% Below Its High?

The Big Australian Bank With a New Zealand Problem

ANZ Group Holdings (NZX: ANZ.NZ) is the largest company by market cap on the NZX, with a valuation north of $131 billion NZD. It is also one of the most widely held stocks by everyday New Zealand investors, thanks to its long dividend history and deep roots in the local banking market. And yet, for all its scale, the share price has been stuck in a frustrating sideways drift - even after delivering what looked like a genuinely impressive set of quarterly numbers.

The stock trades around $44.25 NZD, roughly 8% below its 52-week high of $48.06 set back in February 2026. Over the past two weeks, it has declined in seven of ten trading sessions, with the most recent session barely budging on thin volume. For a bank that just posted a $1.94 billion cash profit (up 75% on the prior half's quarterly average), the price action feels like a disconnect worth investigating.

Q1 FY2026: The Numbers That Should Have Moved the Needle

For the quarter ended 31 December 2025, ANZ's unaudited results showed meaningful progress across almost every metric that matters to shareholders:

  • •Cash profit: $1.94 billion (up 75% vs. 2H FY25 quarterly average; up 17% excluding significant items)
  • •Statutory profit: $1.87 billion
  • •Cost-to-income ratio: Dropped below 50% for the first time in recent memory
  • •Cash return on tangible equity (ROTE): Rose 173 basis points to 11.7%
  • •Customer deposits: Up $39 billion (+5%) to $787 billion
  • •Net loans and advances: Up $8 billion to $837 billion
  • •Net interest margin (NIM): Improved 2 basis points to 1.56%

The headline story is cost. ANZ's productivity program - part of its broader "ANZ 2030" simplification strategy - has already removed more than 60% of planned role exits, cut duplication, and pushed operating expenses down 8% compared with the prior half. That is real operational leverage, and it showed up in the bottom line.

Credit quality was also supportive. Housing arrears (90+ days past due) eased in both Australia and New Zealand, falling from 86 basis points to 81 bps and 82 bps respectively. The individual provision charge of $64 million was $20 million below the prior half's quarterly run-rate, and non-performing exposures remained stable at 0.78% of total credit.

Capital is more than adequate. The Common Equity Tier 1 ratio of 12.15% sits comfortably above regulatory minimums, and the bank's decision to halt the remaining ~$800 million of its share buy-back programme leaves further room for balance-sheet flexibility.

Valuation: Not Demanding, Not Dirt-Cheap

At the current share price, ANZ trades on a trailing P/E of approximately 18.7x and a forward P/E of 14.5x - the gap reflecting analyst expectations of earnings growth as cost savings bed in. The dividend yield sits around 4.2% based on the most recent semi-annual payment of $0.9475, with a payout ratio near 68% that leaves enough headroom for modest growth.

Key valuation metrics:

  • •Market cap: ~$132 billion NZD
  • •52-week range: $28.68 - $48.06
  • •Trailing P/E: ~18.7x
  • •Forward P/E: ~14.5x
  • •Dividend yield: ~4.2%
  • •Payout ratio: ~68%

By historical standards, the trailing multiple is fair rather than cheap. But the forward multiple is arguably more relevant for a bank executing a multi-year cost-out programme, and at 14.5x, ANZ is priced more attractively than it first appears.

The Bear Case: Why the Market Is Hesitant

There are several reasons the share price has not rewarded the Q1 result:

  • •Interest rate uncertainty: The market is pricing in potential RBNZ rate cuts in 2026, which compress net interest margins over time. While ANZ's NIM improved slightly this quarter, the broader trajectory for bank margins in a falling-rate environment is downward.
  • •Economic slowdown risks: New Zealand's economy is growing slowly, and any deterioration in employment or house prices would feed directly into credit losses and loan growth.
  • •Competitive pressure: The big four Australian banks are all fighting for the same mortgage and deposit dollars, and digital disruption from neobanks and fintech lenders is an ever-present threat, albeit gradual.
  • •Suncorp integration: ANZ's purchase of Suncorp's banking division is still being migrated onto ANZ platforms, with completion targeted for June 2027. Integration risk is real, and any hiccups could distract management and inflate costs.
  • •Thin trading on NZX: ANZ's primary listing is the ASX, and the NZX CHESS Depository Interests (CDIs) can trade on low volume, amplifying day-to-day price moves that do not reflect underlying fundamentals.

The Bull Case: Why Patient Investors Might See Opportunity

  • •Cost-out momentum: A cost-to-income ratio below 50% is genuinely impressive for a major bank. If ANZ can sustain this, the earnings leverage is significant - every dollar of revenue falls faster to the bottom line.
  • •Dividend resilience: With 33 consecutive years of semi-annual payments (66 distributions), ANZ has a track record of returning cash through recessions, pandemics, and regulatory overhauls. At ~4.2%, the yield beats term deposits by a wide margin.
  • •Valuation rerating potential: If the 2030 strategy delivers on its promises and earnings estimates rise, the forward P/E of 14.5x could compress further, supporting share price appreciation on top of the dividend.
  • •Deposit growth: A $39 billion increase in customer deposits in a single quarter is a sign of brand trust and pricing power. Deposits are the lifeblood of banking, and ANZ is gathering them at scale.
  • •OCR tailwind: While rate cuts hurt margins, they also reduce arrears and support asset prices. For a bank with $837 billion in loans, a healthier housing market is worth more than a few basis points of NIM.

The Bottom Line

ANZ is not a flashy growth story. It is a mega-cap bank grinding out operational improvements, returning cash to shareholders, and navigating a soft economic patch with a stronger balance sheet than most of its peers. The disconnect between the strong Q1 result and the recent share price weakness says more about macro jitters and thin NZX trading than it does about the underlying business.

At $44.25, roughly 8% below its 52-week high and trading on a forward P/E near 14.5x, ANZ looks fairly priced for a high-quality bank with a 4%-plus yield. It may not be the bargain of the century, but for investors seeking a stable, dividend-paying blue chip with genuine cost-out momentum, the recent pullback looks more like an opportunity than a warning.

*Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice. Stock data may not be real-time. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.*