ANZ Bank vs CBA: Which bank share should you buy?

Should you buy Australia and New Zealand Banking Group (ASX:ANZ) shares or Commonwealth Bank of Australia (ASX:CBA) 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

Since Christmas Eve the Australia and New Zealand Banking Group (ASX: ANZ) share price has been on an impressive run and gained 11.5%.

The Commonwealth Bank of Australia (ASX: CBA) share price has also been a solid performer over the period, rising approximately 6.5%.

Is it too late to buy ANZ Bank and Commonwealth Bank shares?

Whilst I don't think it is too late to buy the shares of either ANZ Bank or Commonwealth Bank, one of these banks strikes me as being better value than the other.

Based on valuation and yield, I think ANZ Bank's shares are the better option for investors right now.

After all, even after its strong run since Christmas Eve, ANZ Bank's shares are still trading at just 10x earnings, 1.25x book value, and provide a very generous trailing fully franked 6.1% dividend.

As a comparison, Commonwealth Bank's shares are trading at 13x earnings, 1.9x book value, and offer a trailing 5.9% dividend yield.

Should you buy ANZ Bank shares?

I think they are in the buy zone now and I'm not the only one that thinks this.

A recent note out of Goldman Sachs reveals that its analysts have ANZ Bank on the broker's conviction buy list with a price target of $29.58.

This price target implies potential upside of approximately 13.5% or almost 20% if you factor in its dividend.

Goldman is bullish on ANZ Bank due to its exposure to the business lending market, opportunities for further absolute cost reductions, potential share buybacks, and its lower bad and doubtful debt charges.

Incidentally, Goldman also likes National Australia Bank Ltd (ASX: NAB) due to its exposure to business lending, which this year the broker believes will outperform housing lending for the first time since 2011.

Another alternative for investors to consider is the VanEck Vectors Australian Banks ETF (ASX: MVB). Rather than choosing one bank to invest in, this ETF gives investors the option of owning all big four banks, the regionals, and Macquarie Group Ltd (ASX: MQG).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

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

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »