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Which is the best ASX bank to buy today?

The ASX has plenty of bank options for us to pick our favourite investment.

Nearly all of us have direct or indirect exposure to one or more of the big ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).

Many ASX exchange-traded funds (ETFs), listed investment companies (LICs) and superannuation funds are invested in the big four ASX banks, so you have exposure even if you don’t own one of the big ASX banks in your own direct portfolio.

Shares of ANZ, NAB and Westpac have drifted lower over the past three months after they reported lower grossed-up dividend payments to shareholders because of a struggle to grow underlying profit and higher capital requirements.

CBA continues to be a leader of the pack in return on equity (ROE) terms, which may be one of the best ways to judge business quality. CBA was the only bank to recently report underlying cash profit growth (excluding effects of buybacks).

Sure, CBA’s grossed-up dividend yield of 7.6% may not be the highest in the industry, particularly when you include regional bank yields like Bank of Queensland Limited (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN).

But, I think it makes much more sense to invest in a bank that is growing profit slightly with a consistent dividend than go for a bank yield with an illusory yield and falling profit.

Foolish takeaway

Commonwealth Bank is probably my preferred long-term domestic ASX bank, although NAB’s new leadership team may be able to do a good job. If we’re including investment banks then Macquarie Group Ltd (ASX: MQG) and Moelis Australia Ltd (ASX: MOE) would be my first two picks.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.