Better buy: Commonwealth Bank of Australia or National Australia Bank Ltd.

At the right price I'd consider owning both Commonwealth Bank of Australia (ASX:CBA) and National Australia Bank Ltd. (ASX:NAB) shares.

| More on:
a woman

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

At the right price I'd consider owning both Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) shares.

CBA & NAB shares in 2017

CBA share price
Source: Google Finance

As can be seen above, shares of NAB, Australia's fourth-largest bank, have outperformed their largest rival CBA by around 10% in 2017.

NAB

NAB shares would be my preferred exposure to the Aussie banking sector if I had to choose one bank to buy today.

The company's track record has been marred by its underperforming overseas assets, like those in the UK and USA. However, following the divestment of its 'non-core' businesses, it is a leaner and more efficient bank.

NAB also has a commanding stake in the Australian and New Zealand business banking market. On the balance sheet, NAB is forecast to pay a hefty dividend to shareholders, as it has the required amount of regulatory capital in place. However, no company is without risk and rising unemployment and bad debts would severely hinder NAB's growth prospects.

Commbank

Australia's largest bank has an enviable track record for both dividends and share price growth. Commbank is a leader in credit cards, mortgages and many other lucrative areas of banking.

This year, Commbank's share price has taken a tumble amid rising concerns of slowing house price growth. However, the biggest concern for investors appears to be the AUSTRAC allegations of money laundering. Potential damages from any breaches are difficult to estimate, given the largely unprecedented nature of the allegations.

Fortunately, in the long run CBA has a licence to print profits.

Foolish Takeaway

Of the two banks, I think NAB is better value today. However, I'm not buying shares in either bank at today's prices today because I would like a more compelling valuation prior to committing my capital. Fortunately, there are plenty of other great opportunities available on the market.

Motley Fool contributor Owen Raszkiewicz has no position in any of the stocks mentioned. You can follow Owen on Twitter @OwenRask. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »