When it comes to buying bank shares, it can be hard to decide which ones to buy over others due to their similarities.
The good news is that brokers across the country have been looking into the sector and have picked out their favourites.
Here’s what brokers are saying about these banking shares:
National Australia Bank Ltd (ASX: NAB)
Analysts at Goldman Sachs rate NAB as a buy and have a $30.45 price target on the bank’s shares. NAB is the broker’s preferred pick in the industry due to the sustainability of its return on tangible equity outperformance, volume tailwinds from its overweight exposure to SME lending, and its cost out opportunity over the near term. Goldman expects the latter to underpin PPOP outperformance. Another positive that the broker thinks the market has underappreciated is its portfolio de-risking. It notes that the portfolio optimisation undertaken since 2010 has led to NAB’s mid-cycle loss rate falling by 22% over the last ten years.
Westpac Banking Corp (ASX: WBC)
A note out of Morgans reveals that its analysts have a buy rating and $33.00 price target on Westpac’s shares. According to the note, the broker likes Australia’s oldest bank due to its relatively low risk profile regarding loan book positioning and low reliance on treasury and markets income. In addition to this, its analysts believe that concerns over its relatively high interest-only home loan exposure have been overblown. They note that the bank has reduced its exposure significantly over the last couple of years without its asset quality underperforming peers in any material way.
The best I have seen is a neutral rating and $29.50 price target for ANZ by analysts at Citi and a neutral rating and $79.00 price target for CBA by Credit Suisse.
This could make it worth skipping those two and picking up this buy-rated bank share instead.
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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.