Which is the best ASX 200 bank share to buy today?

We compare the dividend yield and share price growth of the big four over five years.

| More on:
a group of four people wearing corporate uniforms stand in a line caring stacked boxes with unhappy looks on their faces.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • ASX 200 bank shares have had a tumultuous time after the collapse of two US banks and the forced sale of Credit Suisse to UBS last month 
  • We canvas the experts to see who is backing which ASX 200 bank share above the rest, and why 
  • We compare the dividend yield and share price growth of the big four Australian banks over the past five years

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.

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.

Dividend yield, big four ASX 200 bank shares, over five years

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.

Share price growth, big four ASX 200 bank shares, over five years

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%.


Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in Anz Group, Commonwealth Bank Of Australia, and Westpac Banking. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Is this a good time to buy NAB shares?

Should investors bank on good returns from here?

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Bank Shares

CBA shares: Overvalued or still a buy?

CBA shareholders have seen a lot of gains in 2024. Is it too late to buy?

Read more »

Woman and man calculating a dividend yield.
Bank Shares

What's the outlook for Bank of Queensland shares in 2025?

Here’s what experts predict for BOQ next year.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Why ANZ shares are making big news today

ANZ's CEO is handing back millions as scrutiny grows.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

Why this expert says it's time to sell NAB shares

Are NAB shares a sell heading into 2025?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

'Too high too rapidly': Why CBA shares are a sell

Should you sell your CBA shares today?

Read more »

Happy young woman saving money in a piggy bank.
Bank Shares

Why today is a big day for NAB shares

It’s a big day for NAB shareholders on Wednesday.

Read more »

A man looking at his laptop and thinking.
Bank Shares

Is the market too optimistic on Bank of Queensland shares?

Bank of Queensland shares have raced ahead of the benchmark over the past six months.

Read more »