ANZ (ASX:ANZ) Hits Record High After Profit Surges 75%, But Is It Too Late to Buy?

ANZ Shares Hit Record High After Profit Surge

ANZ Group (ASX: ANZ) surged 8.25 per cent to A$40.20 on results day last week before pushing to a fresh record near A$40.95 by Friday after reporting a quarterly profit that beat expectations. Cash profit reached A$1.94 billion, up 75 per cent compared with the previous half’s quarterly average, mainly because the bank cut costs while keeping revenue steady. The big question this week is whether investors have already fully priced in the turnaround story, despite the possibility of further progress ahead.

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The Matos Turnaround Is Delivering Faster Than Expected

What stood out most was how quickly the cost savings are showing up in the numbers. ANZ Group’s cost-to-income ratio fell to 49.5 per cent, dropping below 50 per cent for the first time. For a bank that has often trailed its Big Four rivals on efficiency, this is a major step forward and a clear sign that CEO Nuno Matos’ restructuring plan is delivering results.

More than 60 per cent of the 3,500 planned job cuts were completed by year-end, and the impact is evident. Operating expenses dropped 21 per cent compared with the previous half-year quarterly average, while revenue stayed steady at A$5.7 billion. In simple terms, ANZ is making the same revenue but spending much less to generate it. That kind of operating leverage helps boost profit growth, exactly what Matos said he would achieve after taking over in May 2025.

Margins also moved in the right direction. Group net interest margin, which shows how much the bank earns on each dollar it lends, rose 2 basis points to 1.56 per cent, ahead of forecasts. Return on tangible equity increased to 11.7 per cent, clearly closing the gap with the Commonwealth Bank of Australia and Westpac. After dealing with a record A$240 million fine from the Australian Securities and Investments Commission and heavy restructuring costs in 2025, these results suggest the toughest period is now over.

ANZ’s Biggest Challenge Lies Ahead

The restructuring gains are impressive, but the harder part of the turnaround is still to come. ANZ holds the lowest mortgage market share of the big four at around 14 per cent, and growing that book typically means offering competitive rates that squeeze margins. Jefferies analyst Andrew Lyons put it simply: the real test will be how ANZ manages its net interest margin when it starts chasing housing growth more aggressively.

The interest rate environment adds another layer of complexity. The RBA hiked rates to 3.85 per cent earlier this month, which should provide a near-term boost to bank earnings. However, higher rates also increase the risk of borrowers falling behind on repayments if inflation stays sticky and household budgets remain under pressure. ANZ noted it remains cautious on the outlook given global economic uncertainty.

The Investor’s Takeaway for ANZ

The valuation tension here is hard to ignore. Of 16 analysts covering ANZ, the consensus is a Hold with an average target around A$35.34, roughly 12 per cent below where the stock trades today. Jefferies is among the bulls, upgrading earnings per share forecasts by 5 to 6 per cent on the back of stronger margins and lower bad debts. Morgans sits on the opposite end, downgrading to Sell and arguing that some margin gains may reflect one-off factors.

We believe ANZ’s improvement is genuine, and the restructuring is delivering faster than expected. However, at record highs and well above where most analysts see fair value, existing holders may want to consider taking some profits off the table. For new buyers, waiting for a pullback closer to the mid-$30s would offer a more attractive entry point. The turnaround story is real, but at these levels, patience could be rewarded.