Two of the big four S&P/ASX 200 Index (ASX: XJO) bank shares hit decade-high prices last week following well-received reports.
They were Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ) shares.
The Westpac share price rose to a 10-year high of $37.31 yesterday. This followed the bank's 3Q FY25 update last Thursday.
ANZ shares reached a decade-high of $33.08 last Friday after the bank posted a 3Q FY25 regulatory update.
After running the ruler over both reports, Morgans has issued new ratings and 12-month price targets on both bank stocks.
Morgans delivers verdict on ASX 200 bank shares
Broker says leverage strength in Westpac share price to trim overweight positions
Westpac reported an unaudited statutory net profit of $1.9 billion in the June quarter, up 14% on the 1H FY25 average.
Morgans recommends that Westpac shares investors "trim overweight positions into the price strength".
Westpac shares have risen by 7.8% over the past five days and 12.8% over the past month.
Yesterday, the Westpac share price closed at $37.31, up 0.65%.
Morgans placed a 12-month share price target of $30.95 on the ASX 200 bank share.
This suggests a potential downside of 17% for investors who buy Westpac shares today.
Morgans said:
WBC surprised with 3Q25 NPAT growth (ex-notable items) of 8%, which was a run-rate well in excess of previous expectations of declining earnings for 2H25F.
The strength of the NIM was the key driver of the surprise, but a number of NIM drivers in the period can't necessarily be extrapolated into 2H25 performance.
While WBC remains our preferred bank, we also view it as overvalued at current prices.
Morgans downgrades ANZ shares
ANZ reported a 3% lift in customer deposits, worth $19 billion, in the June quarter.
Institutional deposits rose by $13 billion, payments and cash management deposits increased $7 billion, and term deposits rose $6 billion.
Morgans downgraded this ASX 200 bank share from trim to sell.
The broker noted that a 6.7% lift in the ANZ share price in August alone has compressed total return potential.
ANZ shares have risen by 1.74% over the past five days and 9.1% over the past four weeks.
On Tuesday, the ANZ share price closed at $32.77, up 0.61%.
The broker has a 12-month price target of $26.84 on the ASX 200 bank share.
This suggests a potential downside of 18% for investors who buy ANZ shares today.
Morgans commented:
Unlike its peers, ANZ's quarterly updates do not include trends in revenue, costs or earnings.
Hence, it is difficult to interpret whether the balance sheet growth is translating into improved financial performance.
We make a mild upgrade to forecast EPS.
