The big four bank shares play a vital role in the Australian economy and hold a dominant market share of the ASX 200.
In fact, they make up almost a quarter of Australia's benchmark index in terms of market cap.
Because of this dominance, the performance of the big four bank shares heavily impacts many investors' portfolios.
This is true both through individual exposure and many ASX ETFs that include these banks.
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How have they performed in 2026?
Compared to the year prior, the big four bank shares have underperformed in 2026.
At the time of writing, year to date:
- Commonwealth Bank of Australia (ASX: CBA) shares are up 5%
- National Australia Bank Ltd (ASX: NAB) shares are down 6%
- ANZ Group Holdings Ltd (ASX: ANZ) shares are down nearly 1%
- Westpac Banking Corp (ASX: WBC) shares have fallen 6%.
There have been several headwinds contributing to this underperformance.
Big four bank shares have generally underperformed in 2026 after entering the year on elevated valuations, leaving limited upside as investors questioned whether earnings growth could justify their premium prices.
Interest rates, softer net interest margins and a rotation into cheaper sectors have also weighed on sentiment toward the major banks.
However, it is worth noting that there has been an upward trajectory in recent weeks, as murmurs of interest rate declines have improved sentiment.
What are experts saying about bank shares?
As we look towards the back half of 2026, there appears to be limited upside for big four bank shares.
For Australia's largest bank, Morgan Stanley recently maintained its sell rating on CBA shares with a $125 target.
This target represents a 26% downside compared to current levels.
Morgan Stanley also has a sell rating on NAB and Westpac shares.
Its price targets of $34.50 and $31.50, respectively, indicate between 13% and 14% downside risk.
Finally, in some good news, Citi reaffirmed its buy rating on ANZ shares recently with a price target of $39.25.
This indicates an upside of roughly 9% from current levels.
Why this unique ASX ETF could be an option
It's important for investors to understand that broker targets aren't guarantees, and analysts can be wrong.
However, the current consensus suggests the major banks may offer limited capital growth after their strong run.
For investors who still want exposure to the sector without relying heavily on any single bank, a diversified ASX ETF such as VanEck Australian Banks ETF (ASX: MVB) could be a smart investment.
It includes a majority exposure to the big four banks in one simple trade, as well as three other large ASX financials shares.
It may help investors diversify their exposure to the big four banks.
