They're two of Australia's big 4 major banks and they've both enjoyed periods of great growth over the past 12 months. But when it comes to Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corporation (ASX: WBC) and their shares, one is expected to outpace the other over the next 12 months.
Are CBA shares a buy for 2026?
CBA shares are trading in the green on Wednesday afternoon. At the time of writing, the shares are 0.21% higher for the day at $152.56 a piece. But over the past month, the shares have tumbled 13.09%, dragging the price 3.31% lower than this time last year.
The share price crash in early-November followed the banking giant's quarterly update. The bank reported a 1% increase in its quarterly cash net profit after tax and a strong CET1 ratio of 11.8%, above regulatory requirements. But the results disappointed investors and raised concerns about the bank's premium share price valuation. Investors started hitting the sell button in panic in what I think signalled the beginning of the bank's share price correction.
Analysts also seem to think the share price still looks expensive at current levels, with many expecting the stock's value to shrink further in 2026.
This month, Medallion Financial Group's Stuart Bromley confirmed his sell recommendation on Australia's biggest bank (courtesy of The Bull). He said that while CBA remains a solid business, the share price is too high. He pointed out that the bank is trading on a price-earnings (P/E) ratio of about 25 times and a modest dividend yield of about 3.15%. This means its valuation sits well above global peers.
Many other analysts seem to hold a similar view on the shares. Data shows that out of 15 analysts, 10 have a strong sell rating on CBA shares and another 3 have a sell rating. Some expect the bank's share price to drop as low as $96.07, which implies a huge potential downside of 37% over the next 12 months.
Are Westpac shares a buy for 2026?
Westpac shares are also trading in the green at the time of writing, up 0.42% for the day at $37.28 each. Over the past month, Westpac shares have dropped 6.4%, but they're still 10.89% higher over the year.
Like CBA shares, Westpac stock also tumbled after the bank released an unexciting FY25 result in early November, however, the drop wasn't anywhere near as dramatic. The bank's net profit after tax dropped 1% over the year. And after excluding notable items, net profit reduced by 2% year over year. But the bank hiked its full-year dividend to $1.53 per share, representing an increase of 2 cents per share.
I'm not sure now is the best time to buy Westpac shares, but I think 2026 will be a flat year for the banking giant, rather than a year marked by a significant share price drop.
Analysts are also unsure about the stock. Out of 16 analysts, data shows 7 have a hold rating on Westpac shares. Another 4 have a sell rating and 5 have a strong sell rating. The average target price of $33.34 implies a potential 10.5% downside over the next 12 months. The lowest target price of $23.03, implies a potential downside of 38.2% at the time of writing.
It's not exactly positive news but when compared to CBA's outlook, Westpac's share price projection into 2026 is a little less… pessimistic.
