Navigating the Big Four: A Market Snapshot for Australian Investors
The Australian banking sector has been a hive of activity recently, with the nation’s “Big Four” – ANZ, Commonwealth Bank (CBA), NAB, and Westpac – all releasing their latest performance updates. For shareholders, the initial market reaction has been largely positive, with share prices generally seeing a boost. However, this raises a crucial question for potential investors: is it too late to jump on board? Let’s delve into what analysts are saying about these financial giants.
ANZ Group Holdings Ltd (ASX: ANZ)
ANZ’s recent quarterly update painted a picture of performance exceeding expectations. This outperformance, however, was primarily driven by aggressive cost-cutting measures. While efficiency gains are generally welcomed, Morgans, a prominent broking firm, noted that ANZ’s management has maintained its full-year cost guidance.
Considering this, coupled with the recent strength in ANZ’s share price, Morgans has made a strategic shift, downgrading its rating on ANZ shares to a “Sell.” Their price target for the bank is set at $32.65. Morgans’ analysts observed that while the first quarter of 2026 (1Q26) trading update suggested ANZ was tracking ahead of its first half of 2026 (1H26) growth expectations, the beat was largely attributable to the pace of cost reductions. Crucially, this was unlikely to alter consensus expectations as ANZ reiterated its FY26 cost guidance of approximately $11.5 billion. Minor adjustments were made to their FY26-28 earnings per share (EPS) forecasts, factoring in stronger 1Q26 Markets revenue, lower-than-anticipated impairment charges (though from an already low base), and a higher number of shares on issue due to increased dividend reinvestment plan (DRP) uptake.
Currently, Morgans estimates ANZ is trading at a stretched valuation, with a price-to-book value (P:TBV) of 1.8 times, a price-to-earnings ratio (PER) of 16 times, and a cash yield of 4.1% (partially franked). These metrics are considered high when compared to ANZ’s historical trading ranges. Consequently, with the recent surge in its share price, Morgans has moved its rating from “Trim” to “Sell,” projecting a potential total shareholder return (TSR) of -15%.
Commonwealth Bank of Australia (ASX: CBA)
Australia’s largest bank, CBA, has also impressed analysts with its first-half performance. Morgans highlighted that CBA’s earnings comfortably surpassed expectations, prompting an upgrade to their financial forecasts for the bank.
Despite the positive earnings, CBA’s shares are trading at what Morgans considers lofty multiples. As a result, the firm has maintained its “Sell” rating, though it has revised its price target upwards to $124.26. CBA delivered a significant beat on its 1H26 earnings expectations. Morgans has materially upgraded their EPS forecasts, anticipating a continuation of higher loan growth and a benign credit loss environment. However, they foresee dividend per share (DPS) growth not keeping pace with EPS growth, citing an approaching tightness in Common Equity Tier 1 (CET1) capital. The retained “Sell” rating, with a potential TSR of -24% (including a 3% cash yield), reflects the current elevated prices and trading multiples.
National Australia Bank Ltd (ASX: NAB)
NAB’s strong quarterly update has led Morgans to lift its forecasts for the bank. The report indicates that NAB is benefiting from a favourable environment characterised by supportive interest rates, healthy credit growth, and robust asset quality.
However, in a recurring theme, Morgans believes NAB shares are currently overvalued. They have therefore retained their “Sell” rating, with a price target of $37.27. Similar to its peers, NAB’s 1Q26 trading update revealed its advantage in the current economic climate. Morgans has upgraded its forecasts to reflect this performance and outlook, setting a 12-month target price at $37.27 per share. Even with more aggressive assumptions than previously, Morgans estimates a higher fundamental value for NAB. Nevertheless, the current share price is still considered to be trading significantly above this revised estimate. The “Sell” rating remains, with a projected TSR of -17% (including a 3.6% cash yield).
Westpac Banking Corp (ASX: WBC)
Westpac presents a slightly more optimistic investment picture from Morgans’ perspective. In response to the bank’s quarterly update, Morgans has upgraded its rating on Westpac shares from “Sell” to “Trim,” with a price target of $35.12.
The 1Q26 result for Westpac was largely stable when compared to the average of the second half of 2025 (2H25) quarterly results (normalised for a restructuring charge in 2H25). This performance was better than initial 1H26 expectations. Morgans is now adopting a more bullish outlook on loan growth and impairments, while also factoring in slightly more conservative cost assumptions. While there is no change to the FY26 forecast EPS, there have been upgrades of 5-8% for FY27-28. The target price has been lifted to $35.12 per share. The upgrade to “Trim” reflects an improved, albeit still negative, potential total shareholder return.
A Divergence of Opinion: Is Anyone Bullish?
While the majority of brokers, including Morgans, view the shares of ANZ, CBA, NAB, and Westpac as overvalued at present, this sentiment is not universal.
For instance, Morgan Stanley has taken a more positive stance on ANZ, upgrading its shares to an “Overweight” rating with a price target of $41.30. Similarly, Jefferies has maintained its “Buy” rating on NAB shares, setting a price target of $50.64. These contrasting views highlight the differing interpretations of the banks’ current valuations and future prospects within the analyst community.
