Commonwealth Bank of Australia (ASX: CBA)'s leadership position has "stalled", Wilsons Advisory says, with other big four banks, ANZ Group Holdings Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC), looking better from an investment perspective.
In a research note sent to clients on Wednesday, Wilsons Advisory said it remains cautious on the sector overall, and its "underweight positioning remain(s) unchanged".
As they said:
Overall, the reporting season demonstrated that sector fundamentals are broadly sound, with headline results largely in line with expectations. However, there were some notable differences in underlying trends and relative share price performance across the majors – with CommBank's (CBA) recent underperformance standing out as a key development.
The Wilsons team said there were several standout themes across the banks, including that credit growth "continues to surprise to the upside, supporting better-than-expected revenue''.
System growth remains above trend, at about 6% in home loans and about 9% in business lending. Banks have expressed confidence this pace can be sustained given a healthy macro backdrop – a view reflected in medium-term consensus forecasts.
Cost starting to bite
Costs were a key differentiator across the sector, they said, with Commonwealth Bank and National Australia Bank Ltd (ASX: NAB) feeling the impact of higher wages, more frontline staff, and greater technology spending, while ANZ and Westpac are holding up better than expected.
In general, the Wilsons team said they were underwhelmed by the growth prospects across the sector.
Overall, despite minor consensus revisions for individual banks, tying together each of the key EPS (earnings per share) drivers, the sector-level earnings story remains broadly unchanged. We continue to expect the banks to deliver modest, not particularly compelling low- to mid-single-digit EPS growth over the medium-term.
CBA losing its edge
They pointed out, however, that there had been a clear shift in earnings leadership within the sector, with Commonwealth Bank falling short in this regard.
CBA has previously been a consistent source of earnings upgrades, offering a degree of relative safety in a market characterised by sluggish earnings growth, China-related weakness impacting resources stocks, and earnings risks associated with broad macro/ political uncertainty. Reliable earnings upgrades attracted momentum-driven quant buying, which, combined with passive flows, pushed CBA's valuation to extreme levels and underpinned its outperformance of the market and its peers.
But this outperformance had started to unwind, the Wilsons team said, as upgrades had waned.
The bank's 'in-line' FY25 result and 1Q26 updates both failed to meet elevated expectations for further earnings upgrades, while also raising concerns around rising costs … this is at a time when other banks – particularly ANZ and Westpac – have shown improving consensus earnings momentum. Overall, with CBA's upgrade cycle stalling, peers gaining consensus earnings momentum, and its valuation premium still substantial, we see further downside in CBA's relative performance as the market continues to rotate.
Wilsons said ANZ was "comfortably the 'best value' bank on all key valuation metrics", while Westpac offered an attractive yield "and holds the strongest balance sheet''.
The Wilson team said NAB had an "uncompelling risk/reward" story and the weakest balance sheet among the major banks.
On the Commonwealth Bank, they said it remained a "high quality franchise, but still by far the most expensive bank on every key valuation measure, making the risk/reward unattractive''.
