The banking sector has been under significant pressure this month amid a number of high profile global bank collapses.
This means that all ASX 200 bank shares are now trading meaningfully lower than their recent highs. That's despite having some of the strongest balance sheets and risk settings in the world.
All in all, this could have created a buying opportunity for investors that are looking for exposure to the sector.
Two options that are popular with investors are ANZ Group Holdings Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) shares. But which of these is the better buy?
Should you buy ANZ or Westpac shares?
The good news is that most brokers are positive on both of these ASX 200 bank shares. So, either of the two could arguably make for a great portfolio addition right now. Furthermore, as I covered here recently, both banks have strong capital positions and significantly higher than required liquidity. These are great qualities to have in the current environment.
But if you were to ask the team at Goldman Sachs, its analysts would say that Westpac shares are the ones you should be buying right now.
This is due to the broker's belief that it stands to benefit from rising interest rates more than peers. It also highlights that its cost cutting plans should be supportive of earnings growth in the current inflationary environment.
In addition, it highlights that Westpac shares trade at a sharp discount to peers. And who doesn't love buying things on sale? Goldman explained:
We reiterate our Buy (on CL) recommendation on WBC given: i) while NIM pressures are accelerating across the sector, WBC's shorter-duration replicating portfolio, and current balance sheet performance, should see its NIM outperform peers, ii) despite WBC recently 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 underlying costs expected over the next two years, iii) the stock is trading at a 25% 12-month forward PER discount to peers (historically a 3% discount), and iv) our TP of A$27.74 offers 36% TSR.
What about ANZ?
Interestingly, while Citi is bullish on Westpac and has a buy rating and $30.00 price target on its shares, it has a preference for ANZ. This is due to its institutional business, which is expects to support solid earnings growth in FY 2023 and FY 2024. Citi has a buy rating and $29.25 price target on its shares. 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.
Overall, there's not much to split the two. But Westpac shares are arguably slightly ahead given the discount they trade at compared to historical averages and their stronger potential returns.
