ANZ rallies on Q1 cash profit and margin surprise, but Morgans cuts rating to sell
ANZ’s Q1 profit beat sent shares soaring — but one broker warns the margin boost may not be sustainable.
Source: Shutterstock
Mentioned
KEY POINTS
- ANZ jumps 8% after a strong Q1 cash profit beat driven by lower costs and a net interest margin surprise.
- Morgans says margin gains may reflect one-offs and downgrades the stock to Sell.
- We break down the numbers, broker reaction, and what it means for investors.
ANZ Group (ANZ) shares jumped about 8% after its Q1 trading update showed a sharp lift in cash profit, driven largely by lower expenses and a small net interest margin (NIM) beat.
Cash profit was $1.94bn for the quarter (statutory profit $1.87bn), with ANZ pointing to a “significant reduction in expenses” alongside improved revenue and returns. CEO Nuno Matos said the result shows “early progress” on the ANZ 2030 strategy and highlighted the productivity program removing duplication and simplifying the bank.
It also reiterated execution milestones tied to the ANZ 2030 strategy, including accelerating integration of Suncorp Bank and ongoing role exits linked to simplification.
Key numbers from 1Q
Operating income up 4% to $5.7bn vs $5.5bn (3.6% beat)
Group Net Interest Margin (NIM) up 2bps to 1.56% vs 1.54% (1.3% beat)
NPAT cash profit up 75% to $1.94bn vs $1.11bn (74.8% beat)
CET1 ratio: up 12bps to 12.15% vs 12.03% (1.0% beat)
Outlook: FY26 cost guidance unchanged
What did analysts think
According to local stockbroker Morgans, the cash earnings beat was driven by “strong cost performance”, with credit quality also flagged as a key positive. They also called out a NIM beat but noted the improvement may be influenced by “unwinding liquid asset balances”.
On costs, ANZ said actions to reduce duplication and simplify the organisation delivered an 8% reduction in expenses (on the company’s preferred comparison basis) and it reiterated there was no change to FY26 cost guidance given at the FY25 result.
As for the bank's NIM, Morgans flagged upside could be partly mechanical, tied to “unwinding liquid asset balances”, rather than a clean, repeatable improvement.
Despite that upbeat near term read through, the broker downgraded its rating on ANZ to Sell from Trim. Morgans did lift its target, though, to $32.65 from $32.57. This implies 19% downside from today's closing price of $40.89. They also cited a FactSet average target of $35.87 (range $24.96-$43.00).
ANZ traded higher after the update, and was one of the few stocks in the ASX 200 to rise today, likely reflecting the market’s focus on the cost step down and better than expected margin and credit signals.
