Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA) shares have both underperformed the 2.3% 12-month gain posted by the S&P/ASX 200 Index (ASX: XJO) earlier this week.
In fact, both of the big four ASX 200 bank stocks are well into the red since this time last year.
With CBA shares recently trading for $157.08 apiece, Australia's biggest bank stock is down 7.8% in 12 months.
Westpac shares have fared even worse, recently down 11.3% for the year at $33.95 each.
Now we shouldn't leave out the fully franked dividends both banks have paid out over the full year. CBA shares trade on a fully franked dividend yield of 3.2%, while Westpac shares trade on a fully franked dividend yield of 4.5%.
Though even with these dividends in mind, the accumulated value of both ASX 200 bank stocks has gone backwards over the past year.
And looking ahead, Red Leaf Securities' John Athanasiou expects they'll both continue to struggle (courtesy of The Bull).
Here's why.
Image source: Getty Images
Time to exit CBA shares?
"CBA shares deserve to trade at a premium given its dominant retail franchise, strong technology platform, solid deposit base and consistent execution," Athanasiou said.
Summarising his sell recommendation on CBA shares, he concluded:
However, Australian banking remains a mature industry, with intense competition across mortgages and deposits limiting the potential for outsized earnings growth. At a premium valuation, investors are paying a higher price for quality, leaving little room for disappointment.
After a substantial re-rating, investors may be better served taking some profits and reallocating capital towards businesses offering stronger growth at more reasonable valuations.
Which brings us to…
Westpac shares could be facing competitive headwinds
Athanasiou also issued a sell recommendation on Westpac shares.
"The bank remains well capitalised and continues to generate solid earnings, but the operating environment is becoming increasingly competitive," he said. "Mortgage pricing is aggressive, deposit competition remains intense, and the scope for sustained margin expansion appears limited."
And Westpac's 4.5% dividend yield isn't enough to tip the scales for Athanasiou.
He noted:
Westpac's dividend remains attractive, but investors should also consider opportunity cost.
We believe there are more compelling opportunities on the ASX, which offer stronger structural growth or more attractive valuations.
Another expert is bearish on CBA shares
Athanasiou wasn't the only analyst to advise selling CBA shares this week.
He was joined by Alto Capital's Tony Locantro.
"The CBA remains Australia's leading banking franchise and delivered another strong result in full year 2026," Locantro said.
Commenting on those strong results, he said:
Cash net profit after tax of $10.982 billion was up 7% on the prior corresponding period. The full-year dividend of $5.05 a share, fully franked, was up 4%. Strong lending, deposit growth and a robust capital position continue to demonstrate the quality of the business.
As for his sell recommendation, Locantro concluded:
However, operating expenses and loan impairment expenses increased.
The CBA continues to trade at a substantial valuation premium to domestic banking peers. Although the underlying business remains strong, the premium valuation leaves little room for disappointment and may potentially constrain prospective returns.
