The two biggest ASX bank shares have been standout performers over the past five years, comfortably beating the broader market. While the S&P/ASX 200 Index (ASX: XJO) has gained around 24% in that time, Commonwealth Bank of Australia (ASX: CBA) has surged roughly 96% and Westpac Banking Corporation (ASX: WBC) has climbed about 56%.
But the tide may be turning. Despite their strong run, signs are emerging that the sector could be running out of steam. And some experts believe the slowdown could have further to go.
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CBA: Premium pricing under pressure
CBA shares have continued to push higher in 2026, rising around 8% year to date. That's despite long-running concerns that the $292 billion ASX bank share is trading well above fair value.
Analysts widely agree that the bank's valuation looks stretched compared to its peers, with its current price not fully supported by underlying fundamentals. At the time of writing, CBA trades on a price-to-earnings (P/E) ratio of 28. That's significantly higher than other major Australian bank stocks.
With shares sitting at $174.49, CBA is also up about 6% over the past 12 months. Yet broker sentiment remains overwhelmingly negative. According to TradingView data, 14 out of 16 brokers rate the stock as a sell or strong sell, with just two suggesting a hold.
The average price target sits at $129.88, implying around 28% downside from current levels. Some bearish forecasts go even further, suggesting the shares could fall as low as $90 within the next year. That's a potential drop of nearly 50%.
Westpac: Cracks appearing in outlook
This $133 billion ASX Bank share is another big four bank facing growing scepticism. While its share price has performed well — up 1% year to date and 22% over the past 12 months to $39.01 — concerns are building about the road ahead.
In a recent trading update, the bank flagged risks stemming from disruptions in energy markets, warning that supply shocks could drive higher inflation and interest rates. That combination is likely to weigh on economic activity and place additional strain on borrowers.
Westpac also acknowledged that a softer economic backdrop could prove challenging for some of its customers. Following the update, several brokers downgraded their outlook on the stock, shifting to more cautious or outright bearish positions.
Consensus estimates now point to a strong sell rating, with an average price target of $34.75. That suggests a potential downside of around 11% from current levels.
Foolish Takeaway
After years of outperformance, Australia's major banks may be entering a more difficult phase. Elevated valuations, slowing economic conditions, and cautious broker sentiment all point to increased downside risk, particularly for CBA and Westpac.
While ASX bank shares have long been seen as reliable income generators, investors may need to reassess whether current prices adequately reflect the challenges ahead.
