It certainly was a tough week for the banking sector. Due to the collapse of Silicon Valley Bank and the almost-collapse of Credit Suisse, investors were selling down ASX 200 bank shares.
While this is disappointing, if you have confidence in the state of the Australian banking sector, then this could be a great opportunity to pick up shares at a decent discount to recent prices.
Which ASX 200 bank shares should you buy?
There are two ASX 200 bank shares that brokers appear to rate higher than most at current prices. The first is ANZ Group Holdings Ltd (ASX: ANZ).
The team at Citi is particularly bullish on the investment opportunity here and have a buy rating and $29.25 price target on ANZ's shares. Based on the current ANZ share price of $22.81, this suggests potential upside of 28% for investors over the next 12 months.
And with Citi forecasting a $1.66 per share fully franked dividend in FY 2023, this equates to a 7.3% dividend yield.
Why is it bullish?
Citi likes ANZ due to its exposure to institutional lending. It commented:
ANZ remains our top pick in the sector, and we expect the lending momentum, particularly in institutional, to continue to differentiate vs peers.
The broker also highlights that ANZ's first-quarter update appears to indicate that it is performing ahead of expectations in FY 2023. It adds:
ANZ's 1Q23 disclosures exhibited strong trends in both lending growth and asset quality. No earnings disclosure was provided, but we think that after backing out RWA movements from capital, it comfortably implies above market earnings.
Another ASX 200 bank share to buy
The other ASX 200 bank share to buy could be Westpac Banking Corp (ASX: WBC).
Among the most bullish brokers is Goldman Sachs, which has a conviction buy rating and $27.74 price target on the shares of Australia's oldest bank. Based on the current Westpac share price of $21.24, this implies potential upside of almost 31% for investors.
In addition, Goldman is expecting a $1.47 per share fully franked dividend in FY 2023. This equates to a 6.9% yield.
The broker explained that Westpac is its top pick in the banking sector. It said:
We are Buy-rated (on CL) and continue to see WBC as our preferred exposure to the A&NZ Financials reflecting: i) its strong leverage to rising rates, ii) despite WBC revising its FY24E cost target to A$8.6 bn (from A$8.0 bn), the bank's performance on cost management remains strong in this inflationary environment with a 9% step down in costs expected over the next two years, iii) the business is still investing effectively in its franchise, and iv) we note the stock is trading at a notable discount to peers, versus the historical average discount of 2%.
