RBA March 17 Decision: Which ASX Bank Stocks to Buy, Hold and Sell

ASX bank stocks are in focus ahead of the RBA’s March 17 decision

The RBA surprised nobody when it hiked rates to 3.85% in February, the first increase since 2023. Most investors assumed the next move would not come until May. Then Governor Michele Bullock took the stage at the AFR Business Summit on March 3 and made clear that “every meeting is live,” specifically warning against ruling out a March 17 move. Add an Iran war that has sent Brent crude above US$90 a barrel, its highest since 2023, and the inflation picture looks far messier than it did at the start of the year. For investors holding ASX bank stocks, the key question is no longer whether rates will rise again. It is whether the sector can keep climbing once they do.

What are the Best ASX Bank Stocks to invest in right now?

Check our buy/sell tips

Why the March 17 Decision Is Harder to Call Than Markets Think

Most economists still expect the board to hold on March 17 and wait for the full quarterly CPI print, due April 29, before acting in May. Bullock pushed back directly on that assumption. With headline inflation at 3.8% and unemployment at 4.1%, she said the board would be “actively looking at whether or not it needs to move more quickly.”

The Iran conflict is the wildcard. Oil has surged, with Brent crude settling at US$92.69 per barrel, briefly trading above US$94, its highest level since September 2023, as the war expanded into areas critical to global oil supply. Energy price spikes of this scale historically feed into inflation expectations within one to two quarters.

Bullock has flagged that a prolonged conflict creating a “very elevated and lengthy rise in energy prices” would ultimately feed through to economic activity. A second consecutive hike would be the first time the RBA has moved in back-to-back meetings since the 2022 tightening cycle.

Higher Rates Help Banks, But the Good News Is Already Priced In

Here is the paradox. When rates rise, banks make more money. Each 25-basis-point hike adds roughly 2 to 4 basis points to net interest margins across the Big Four, according to Macquarie research. CBA and Westpac benefit most because of their large, low-cost deposit bases.

The problem is the market already knows this. Average price-to-earnings multiples across the sector sit at around 21 times. That is not cheap. And a second hike adds real pressure on borrowers, which means credit quality becomes a bigger concern the further this cycle goes.

The Investor’s Takeaway for ASX Bank Stocks

Buy: Westpac (ASX: WBC). This is the best value of the Big Four right now. Trading at around 20 times earnings, it is cheaper than CBA while offering the same rate of leverage. Its Q1 2026 profit rose 5%, costs are under control, and APRA lifted its capital penalty overlay last October. We believe the risk-reward here is the most attractive in the sector.

Hold: NAB (ASX: NAB). Business lending strength is real, and the February result was solid. But non-performing loans are the highest of the Big Four at 1.55%. Fair value, not a bargain. Sit tight and watch credit quality closely.

Reduce: CBA (ASX: CBA). Nobody doubts CBA’s quality. But at nearly 28 times earnings, it is priced for perfection with little room for disappointment. A reasonable point to trim if you are sitting on strong gains.

Avoid: ANZ (ASX: ANZ). An A$1 billion APRA capital add-on and a record A$240 million ASIC penalty create too much overhang. Wait for clearer signs of regulatory progress before revisiting.

March 17 will answer some questions, but May is the meeting that truly matters. Investors who position carefully now get the better entry point regardless of what the board decides next week.