The ASX bank share sector is a very important segment of the S&P/ASX 200 Index (ASX: XJO).
There are a number of important businesses such as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG) and Bendigo and Adelaide Bank Ltd (ASX: BEN).
How the big banks perform plays an essential role in the Australian economy and the ASX share market. A key question to me is – are they good value?
Fund manager Wilson Asset Management (WAM) has shared thoughts on major ASX bank shares in the context of the WAM Leaders Ltd (ASX: WLE) portfolio. WAM Leaders is a listed investment company (LIC) that looks to actively invest in large ASX shares at attractive valuations.
In its latest commentary about ASX shares, the WAM Leaders investment team talked about their view on the major ASX bank shares of CBA, Westpac, NAB and ANZ.
Image source: Getty Images
Do the big four ASX bank shares have a good outlook?
Following the end of reporting season, where CBA announced its FY26 result and the other big banks revealed quarterly updates, Wilson Asset Management said that the banks' reports were broadly in line with expectations.
However, bank commentary pointed to a moderation in the outlook for credit growth as the housing market digests the impact of three rate hikes earlier in the year and recent federal budget changes.
The WAM Leaders investment team noted that revenue growth is also showing signs of slowing from the strong levels seen earlier in the cycle.
The LIC's fund managers highlighted that business lending pipelines remain "relatively healthy", but mortgage growth expectations have been revised to lower levels.
Are the valuations of ANZ, NAB, Westpac and CBA shares attractive?
The Wilson Asset Management team said that they remain underweight. This means having a smaller allocation to banks than the ASX 200 does, due to the more challenging outlook for credit growth, alongside increasing competition and signs of some deterioration the ASX bank shares' asset (loan book) quality.
In terms of valuation, according to Commsec, the CBA share price is valued at 24x FY27's estimated earnings. It trades with a higher price/earnings (P/E) ratio than many other Australian (and global) banks, though some of that premium could be justified by its impressive quality.
Turning to the other banks, based on the Commsec profit projection, the Westpac share price is valued at 16x FY27's estimated earnings, the NAB share price is valued at 15x FY27's estimated earnings and the ANZ share price is valued at 15x FY27's estimated earnings.
Based on what the WAM investors said, there are better value opportunities out there than the major ASX bank shares.
