Westpac Banking Corp (ASX: WBC) shares have delivered strong returns for shareholders in recent years.
The bank still offers an attractive dividend and remains one of the largest financial institutions in Australia.
But if I were investing fresh money today, I think there are two ASX shares with better prospects for long-term total returns.
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Why I am cautious on Westpac
My issue with Westpac is not the quality of the bank. It is the amount of growth I can see from here.
Consensus forecasts point to only modest earnings per share growth over the next couple of years, while the dividend is expected to remain broadly flat.
At the same time, Westpac operates in a highly competitive mortgage and deposit market. Winning more home loans does not necessarily translate into strong profit growth if margins are being squeezed in the process.
That leaves me wondering where a substantial increase in shareholder returns would come from.
Macquarie Group Ltd (ASX: MQG)
Macquarie would be one of my alternatives to Westpac shares. Its opportunity is much broader than traditional Australian banking.
Macquarie operates across asset management, commodities, infrastructure, energy, financial markets, and banking. That gives the group exposure to investment trends happening around the world.
I particularly like its ability to deploy capital into areas such as infrastructure, renewable energy, and transport when attractive opportunities appear.
Earnings can be uneven from year to year, and Macquarie will always be influenced by market conditions.
But over a longer timeframe, I think the company has more ways to grow than Westpac.
If Macquarie continues expanding its global businesses and finding attractive places to invest, I can see earnings becoming considerably larger over the next decade.
ResMed Inc. (ASX: RMD)
ResMed is the other ASX share I would choose ahead of Westpac.
The company develops devices, masks, and software for sleep apnoea and respiratory care.
What I like is how much of the potential market remains untreated.
More than one billion people globally are estimated to have sleep apnoea, yet diagnosis and treatment rates remain relatively low. That leaves ResMed with a substantial pool of potential patients still to reach.
The business also benefits after a patient starts treatment. Masks and other accessories need replacing over time, giving ResMed recurring revenue alongside sales to new patients.
Its recent decision to sell the MatrixCare software business should also allow management to concentrate more closely on its core sleep and respiratory operations.
I think that combination of a large underserved market, recurring demand, and continued innovation gives ResMed a long runway.
Foolish takeaway
Westpac shares could still be a sensible choice for investors prioritising dividends.
But I think its future returns are likely to rely more heavily on income and modest earnings growth.
Macquarie and ResMed give me clearer opportunities for the underlying businesses to become substantially larger over time.
For that reason, I would back both to deliver stronger total returns than Westpac over the long term.
