ANZ Bank (ANZ) released its first-quarter trading update this morning, which was much better than expected. Normally, we don’t comment on quarterly updates as they can be misleading, though ANZ’s trading update revealed some interesting moves that have been reflected in today’s share price movement. The HNW Core Portfolio holds a 9% weight to ANZ.

Key Points:

  • Profit Up:  Quarterly Profit up +6% to $1.9 billion, an excellent outcome with loan growth flat and no major change in bad debts (still extremely low at 0.04% of loans).

  • Productivity Program: In October 2025, the new ANZ CEO, Nuno Matos, outlined how ANZ would grow profits through reducing costs within the business. In the quarter, operating expenses declined to $2.8B from $3.1B, a big move that dropped to the bottom line. Over the years investors have seen many cost savings drives by the Major Banks that did not show material changes, Westpac’s project Unite announced in 2024 has largely seen savings being absorbed by additional tech spend. As such, the market was sceptical of the Portuguese banker’s ability to deliver.

  • Why is the Share Price Up? In a very competitive loan market where ANZ competes with 4 competitors selling a largely undifferentiated product with all having the same cost of capital, cutting rates to drive additional revenue will be immediately matched by competitors.  Consequently, cutting costs is a way to drive earnings growth without upsetting the oligopoly.  ANZ’s cost base has historically been relatively higher than the other banks, and this result saw the banks cost to income ratio below 50% for the first time, 49.5% from 54.6%.  This has primarily come from reducing headcount by 2,000 and removing 1,000 contractors

CEP Strategy: We own ANZ in the Portfolio on both valuation grounds and the tailwinds the bank will enjoy over the next few years as Suncorp Bank continues to be integrated into the ANZ system and increases ANZ market share, as well as rationalising its branch network. Despite today’s move, ANZ remains the cheapest bank and trades on a PE of 16x and a dividend yield of 4.5%

ANZ finished up +8.5% to $40.35 – probably an excessive reaction assisted by a stellar result from CBA that has continued to lift the entire banks sector, and the rotation out of the tech sector.