The major Australian banks have recently released their quarterly updates, revealing varied performance and outlooks that have prompted analysts to reassess their ratings. Notably, the four largest banks—ANZ Group Holdings Ltd, Commonwealth Bank of Australia (CBA), National Australia Bank Ltd (NAB), and Westpac Banking Corp—have seen their share prices react positively to the news. However, questions remain about whether it is still a wise time to invest in these institutions.
ANZ Group Holdings Ltd Insights
For ANZ, the quarterly results showed that the bank is exceeding initial expectations, particularly in terms of cost management. According to Morgans, this performance was largely driven by operational cost reductions. Despite this, ANZ has maintained its full-year cost guidance at approximately $11.5 billion. As a result, Morgans has downgraded ANZ’s shares to a sell rating with a target price of $32.65.
Morgans noted, “On face of it, the 1Q26 trading update suggested ANZ was tracking ahead of 1H26 growth expectations. However, the beat was driven mostly by the speed of cost-out and will unlikely affect consensus expectations.” The bank is currently trading at 1.8x P:TBV and a 4.1% cash yield, figures that Morgans considers stretched compared to historical averages.
Commonwealth Bank of Australia Performance
CBA, Australia’s largest bank, reported earnings that surpassed forecasts during the first half of the financial year. Morgans has subsequently raised its earnings per share (EPS) expectations. Despite this positive outcome, the bank’s shares are trading at high multiples, prompting Morgans to retain a sell rating with an updated price target of $124.26.
The broker stated, “CBA delivered a meaningful beat of 1H26 earnings expectations,” highlighting that while EPS growth is anticipated to continue, dividend per share (DPS) growth may not keep pace due to expected capital constraints. The potential total shareholder return (TSR) at current prices is projected at -24%.
National Australia Bank Ltd Updates
NAB has also received an upgrade from Morgans following a strong quarterly performance. The bank benefits from favorable conditions in interest rates, credit growth, and asset quality. Despite these positives, Morgans has retained a sell rating with a target price of $37.27, citing that shares are still overvalued relative to their revised valuations.
Morgans remarked, “Like its peers, NAB’s 1Q26 trading update showed it is benefitting from a supportive interest rate environment. However, the share price is trading far ahead of this revised estimate,” indicating a potential TSR of -17%.
Westpac Banking Corp Outlook
In contrast to the other three banks, Morgans has taken a slightly more optimistic view on Westpac. Following the bank’s quarterly update, it has upgraded Westpac shares to a trim rating from sell, with a new price target of $35.12. Morgans noted that Westpac’s performance was stable compared to previous results and has factored in a more positive outlook for loan growth.
The report stated, “We are assuming a more bullish loan growth and impairments outlook than previously, leading to modest upgrades for FY27-28F,” indicating a shift in sentiment despite the bank’s ongoing challenges.
Contrasting Analyst Perspectives
While the general consensus among brokers is that ANZ, CBA, NAB, and Westpac shares are overvalued, there are notable exceptions. Morgan Stanley has upgraded ANZ shares to an overweight rating with a target price of $41.30. Additionally, Jefferies has retained its buy rating on NAB shares, setting a target price of $50.64.
This divergence in opinions suggests that while many analysts are cautious about the major banks, some see potential in specific stocks.
Investors weighing their options should take into account these analyses and consider the broader market conditions when deciding whether to buy, hold, or sell shares in these prominent Australian banks.
