Should I buy ANZ shares after it reported a $7.6bn FY26 profit?

ANZ Group Holdings Ltd (ASX: ANZ) shares are trading lower on Monday morning, falling to around $39.85 following the release of its FY26 results.

So, has the weakness created an opportunity to buy?

What did ANZ report?

At first glance, ANZ's results look impressive. The bank reported a 31% increase in annual cash profit to approximately $7.6 billion or 252.6 cents per share.

However, that figure needs some context. Last year's result included significant expenses that affected profitability. Excluding those items, ANZ's cash profit increased by a more modest 10%.

That's still respectable growth, but there were other areas that may have disappointed investors.

For example, operating income increased just 1% on a comparable basis, suggesting the bank is finding it difficult to grow revenue in a competitive market.

There were also signs of pressure on customers. ANZ's credit impairment charges increased 32% to $582 million as management made additional provisions for potential loan losses.

The bank acknowledged that higher interest rates and living costs were putting more pressure on some borrowers during the second half.

And with economic conditions remaining uncertain, I can understand why investors might be cautious. However, I think there were some encouraging developments that deserve attention.

Why I'd buy ANZ shares

What I like about ANZ's results is the progress the bank is making under CEO Nuno Matos.

Since taking over, Matos has been focused on simplifying the business, reducing unnecessary costs, and improving returns for shareholders.

And I think we're starting to see the benefits. ANZ delivered $902 million in gross cost savings during FY26, exceeding management's previous expectations.

That helped the bank improve profitability even though revenue growth was subdued.

I believe there's considerable value in making ANZ a more efficient business. If management can keep costs under control while gradually growing revenue, more of that income should flow through to profits.

And there's already evidence that shareholders are benefiting. ANZ's cash return on tangible equity improved to 11.56%, compared with 10.47% a year earlier after adjusting for significant items.

I think that's encouraging because it shows the bank is becoming more effective at generating returns from the capital invested in its operations.

I'm also optimistic about what comes next. The integration of Suncorp Bank remains on track for completion in June 2027, while ANZ expects to introduce its new customer banking platform across its retail and small business operations by September.

These initiatives should help simplify the business further, improve customer experiences, and create additional opportunities to grow.

And although credit provisions increased, actual loan losses remained low, suggesting the bank's overall loan portfolio remains in reasonable shape.

Of course, ANZ still has plenty of work ahead, particularly in completing its transformation and addressing risk management weaknesses.

However, I believe management is making encouraging progress, and there's scope for further improvements in profitability over the coming years.

At around $39.85, ANZ shares also look reasonably valued to me.

I calculate that Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA), and National Australia Bank Ltd (ASX: NAB) currently trade on PE ratios of 18.4x, 25.5x, and 20x FY26 earnings, respectively, making ANZ the cheapest in the group.

Foolish takeaway

I think ANZ's results provide reasons for optimism about where the business is heading. The bank is becoming more efficient, improving shareholder returns, and making progress on several important initiatives.

There may be further challenges along the way, but I like the direction management is taking.

At around $39.85, I'd be happy to buy ANZ shares and give its transformation time to deliver.

The post Should I buy ANZ shares after it reported a $7.6bn FY26 profit? appeared first on The Motley Fool Australia.

Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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