There are some S&P/ASX 200 Index (ASX: XJO) bank shares that look like a buy to me, despite the current difficulties the banking industry is seeing in the northern hemisphere.
Ten days ago, Silicon Valley Bank (SVB) collapsed and regulators had to step in to ensure depositors were able to access their money.
Credit Suisse in Switzerland is also facing difficulties, with the investment bank seemingly going to be acquired by UBS.
There has been much analysis of what went wrong at SVB. It seemed part of the problem was that SVB's at-call deposits were matched with longer-term bonds. Due to the impacts of higher interest rates, selling those bonds before maturity led to a loss for the business.
It also didn't help that an extremely high proportion of deposits in SVB were from technology business clients. It's no surprise that those clients with large sums of cash in the bank would want to protect their funds, considering their businesses rely on regularly drawing on that money while they aim for cash flow breakeven status.
However, I think ASX 200 bank shares are in a much better position than their northern hemisphere counterparts for a few different reasons. That includes strong capital levels, a high level of household customers, and low levels of loan arrears.
With that in mind, these would be my current top three ASX 200 bank shares to buy, in my opinion.
Macquarie Group Ltd (ASX: MQG)
Macquarie is a very diversified ASX financial share. The banking segment of Macquarie is growing rapidly. But, it's very strongly capitalised – the bank common equity tier 1 (CET1) ratio was 13.3% at 31 December 2022.
But, I also like that the business can earn profit from its other segments including asset management, investment banking activities, and commodities and global market activities.
It's the diversified business that has enabled the net profit after tax (NPAT) to be up in FY23 to date, despite FY22 being a strong year.
I think Macquarie will be able to sail through any economic problems.
National Australia Bank Ltd (ASX: NAB)
NAB has really turned things around under the leadership of Ross McEwan.
The bank is also well-capitalised with a CET1 ratio of 11.3% at 31 December 2022. It's also growing at a fast pace. In the FY23 first quarter, cash earnings jumped 18.7%, which makes the NAB share price more compelling.
In terms of valuation, Commsec numbers put NAB shares at 11x FY23's estimated earnings with a possible grossed-up dividend yield of 8.7%.
Westpac Banking Corp (ASX: WBC)
Westpac is another of the big four ASX 200 bank shares, but I'd currently rate it higher than Commonwealth Bank of Australia (ASX: CBA) because of its much-lower valuation and higher dividend yield.
I also prefer Westpac to ANZ Group Holdings Ltd (ASX: ANZ) because I'm uncertain about ANZ's move to acquire the banking division of Suncorp Group Ltd (ASX: SUN).
According to Commsec numbers, the Westpac share price is valued at 10x FY23's estimated earnings with a grossed-up dividend yield of 9.3%. I think these numbers look very compelling.
