Even though the US and Europe have seen troubles in their banking sector, the major ASX banks have been going gangbusters.
The ANZ Group Holdings Ltd (ASX: ANZ) share price, for example, has rocketed 22.5% since late March last year, and National Australia Bank Ltd (ASX: NAB) has lifted more than 27% since June.
So, right now, which is the better buy?
Let's break it down:
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ANZ vs NAB shares
Firstly, let's compare the dividends.
ANZ hands out a better dividend yield of 6.4% but it is only 56% franked. While NAB shares currently pay out 5.2%, they are fully franked.
So ultimately there is not a huge difference on that metric.
In the 2023 financial year that ended September, ANZ made $7 billion net profit on 1.7% net interest margin (NIM). NAB managed $7.4 billion on 1.5% NIM.
Again, not much in it.
What do the experts think?
According to CMC Invest, a lukewarm 6 out of 17 analysts rate NAB shares as a buy. ANZ's endorsement rate is only marginally better with 7 buy ratings from 16 analysts.
It's a tough choice.
Do you even have to buy a bank?
Perhaps the bigger question is whether it is currently worth buying bank shares at all.
The analysts at VanEck recently pointed out that "the rally in bank [stock] prices has stretched their valuations".
"Australia's banks, when compared globally, are also the most expensive in the developed world by 12-month forward price to earnings and price to book," they said on the VanEck blog.
"While Australia's prospects for a soft landing have improved for 2024, the market seems to be pricing a dream scenario for the banks despite the risks of increased mortgage stress in a prolonged higher interest rate environment."
Also, the banking sector can be irrationally competitive.
The VanEck memo reminded investors that only a few months ago, Australian banks waged a vicious home loan price war against each other.
This ate into their NIMs at a time when interest rates had increased 12 times in just over a year.
"Each of Australia's 'Big 4' banks face continuing headwinds in 2024.
"A subdued economic outlook and potential RBA rate cuts could see the Big 4 banks' net interest margins continue to deteriorate."
So which is the better bank buy?
Maybe neither.
