ANZ Banking Group (ASX:ANZBY) will need to carve out about A$400 million from costs in 2027 and a further A$300 million in 2028 to meet its savings goals, with turnaround ambitions that are “tough” and “too optimistic”, Morgan Stanley analyst Richard Wiles warns.
In a client note, Wiles says ANZ faces a difficult balancing act: growing revenue while shrinking its cost base. He argues the bank’s return-on-equity and cost-to-income targets look overly ambitious and that ANZ continues to carry “competitive disadvantages” in retail banking.
Wiles credits CEO Nuno Matos for setting out a clear plan but says investors will want to see “early signs” of cost improvement before assuming ANZ’s valuation discount to peers can close. The bank is already trimming about A$150 million from expenses as investment spending recedes, but still needs to extract a further A$650 million of productivity gains.
Historically, annual savings have run at roughly A$250–A$400 million. Wiles believes a step-up to A$650 million in FY26 is achievable, followed by additional reductions of A$400 million in 2027 and A$300 million in 2028.
Even so, he cautions that ANZ’s cost-to-income and ROE targets rely on “ambitious” revenue growth outcomes that are unlikely to materialise. Matos’ push to upgrade ANZ’s retail offering is necessary to narrow the technology and product gap with rivals, Wiles says, but execution risk remains high.
Despite the tougher setup, Wiles raises his price target on ANZ to A$34 per share.