ASX 200 bank shares have had a tumultuous run lately. The collapse of two banks in the United States and the forced sale of Credit Suisse to UBS created a global shockwave for banking stocks.
So not fun.
The good news is that the big four Australian banks, in particular, are extremely well-capitalised and able to withstand economic headwinds better than most.
They are strictly regulated — more so than financial institutions in other countries — which is one of the reasons they've withstood big events like the global financial crisis (GFC) pretty well by comparison.
Our big four banks are among the top 10 companies of the ASX 200 by market capitalisation.
The biggest is Commonwealth Bank of Australia (ASX: CBA) with a market cap of $168 billion.
And a fun fact: The oldest is Westpac Banking Corporation (ASX: WBC), which was founded in 1817.
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Which is the better ASX 200 bank share to buy?
Well, that's a tough question.
Determining the best one depends a lot on the criteria you use, right?
And also, what your goals are as an investor.
For example, is growth or income more important to you?
Identifying meaningful points of difference in the businesses of the big four ASX 200 bank shares is hard for the ordinary investor.
All four are multi-billion dollar companies that dominate banking market share in Australia.
Each of these ASX 200 bank shares is seen as an ASX blue-chip stock and a safe-haven pick.
They pay above-average dividends, as shown in the five-year chart below.
Well, a caveat on CBA shares there.
A 4.26% dividend yield is solid but not spectacular. But what CBA shares don't pay in dividends they make up for with outstanding share price growth, as shown in this five-year chart below.
So, how do you decide which one is best to buy?
We could go through all the metrics of fundamental analysis.
We could analyse the share price movements of each one to decide which has the most room for growth, or, which one delivers the most passive income.
Or, we could just take a shortcut and ask the experts. Sounds good to me.
Let's see why these experts are backing one particular ASX 200 bank share over the others.
Which bank?
Commonwealth Bank of Australia (ASX: CBA)
UBS has a $100 price target on CBA shares, while Morgans reckons $96.11 is more realistic.
Fairmont Equities' Michael Gable says CBA shares are worth the premium, as per The Bull.
Gable says:
Although CBA is the most expensive bank, we believe the price premium is justified because of its quality. Over the longer term, it outperforms the other major banks.
UBS has a neutral rating and a $100 price target on CBA shares.
ANZ Group Holdings Ltd (ASX: ANZ)
The team at Citi are backing ANZ shares over the other ASX 200 bank shares. The reasoning is that ANZ has lower net interest margin (NIM) sensitivity to activity in the home loan market.
Citi says Australian home loans comprise 40% of gross loans and advances on ANZ's books. This compares to nearly 70% for the Commonwealth Bank.
Citi has a 12-month target of $29.25 for the ANZ share price.
UBS has recently placed a buy rating on ANZ shares with a $25 price target.
National Australia Bank Ltd (ASX: NAB)
Goldman Sachs has a buy rating and a $35.42 price target on NAB shares.
UBS says NAB shares are a sell. It recently cut its 12-month price target by 24% to $25.
Westpac Banking Corporation (ASX: WBC)
Morgans has an add rating on Westpac shares with a $25.80 price target.
UBS recently reduced its rating on Westpac to neutral and dropped its share price target to $22.50.
What's next for ASX 200 bank shares?
According to The Australian, Citi expects the NIMs of the ASX 200 bank shares to improve.
The team points out that competitive fixed rates have reduced NIMs in recent times.
However, with fewer new loans being written and, thus, fewer rate discounts and cashbacks being handed out, Citi reckons the major banks' NIMs won't continue falling when the Reserve Bank ceases rate hikes.
Citi analyst Brendan Sproules points out that variable rate discounting remains at half the level it was during the days of low fixed rates, and the number of new mortgages has fallen by about 30%.
