ANZ was the Best Big 4 Bank in FY26 by a wide margin! But will the momentum continue?

The battle for ‘Best Big 4 Bank in FY26’ wasn’t even a contest. ANZ closed the financial year up 16% while CBA (ASX: CBA) and NAB (ASX: NAB) shares have both fallen and Westpac (ASX: WBC) has only managed a 3% gain.

For a bank that spent much of the past two years being treated as the laggard of the sector (burdened by remediation costs, a bloated cost base and an institutional arm that consumed a fair chunk of management’s attention) this is no mean feat. Add into the fact that  the Big 4 Bank’s key earnings driver over 25 years (through property investment) looks to be slowing down, and the achievement becomes even more monumental.

So will it continue in FY27?

Why ANZ Was The Best Big 4 Bank in FY26

The simplest explanation for ANZ being the best performer of the Big 4 is that it is the only one of the quartet currently delivering a credible self-help earnings story. ANZ’s most recent results (for 1H26 which is the 6 months to the end of March 2026) showed a cash profit up 70% on the prior corresponding period, with operating expenses down 22%.

Some of that improvement reflects a low base (the prior period was distorted by one-off restructuring and remediation charges) but the underlying trend is real. ANZ has now delivered around half of its A$800m gross cost-savings target for FY26, and management has reiterated the target rather than walking it back, which suggests the remaining savings are considered achievable rather than aspirational.

Return on tangible equity has moved to 11.6%, cost-to-income has improved to 49.4%, and CET1 capital sits at 12.39%. It’s true that none of these numbers look spectacular in isolation, but the direction of travel is more critical than the absolute level. ANZ has been the bank with the most room to improve on efficiency for some time. But it was not the bank actually doing so…until FY26 as we just showed.

You could still argue the businesses CBA and NAB were remain best-in-class on cost and margin metrics. Be that as it may, that fact left them with less obvious internal levers to pull. As for Westpac, it has genuine turnaround potential of its own, particularly around its technology simplification programme, but that story has been running for longer and much of the anticipated benefit already appears to be reflected in its share price.

One cannot also ignore the facts that two long-awaited milestones promised to deliver dividends finally are. The first was the long awaited Suncorp acquisition finally cleared the hurdles in early 2024 and was integrated over time for some months afterwards. The rollout of its ANZ Plus platform was the other – management promised it’d deliver 35% lower costs. For investors, seeing is believing.

The CBA effect

It would be an oversight to explain ANZ’s FY26 without reference to what has happened at CBA, because a large part of the divergence between the two banks is relative rather than absolute. CBA spent the best part of 2 years trading at valuations well above its historical range and, by extension, well above the rest of the sector, on the back of its reputation as the highest-quality franchise in Australian banking. Investors kept dancing until the music stopped…and stopped it did Matt Comyn’s bank delivered results in 1H26 and for Q3 of 2026 that missed elevated market expectations, and that was even before the CGT changes which added insult to injury.

ANZ, trading on a meaningfully lower earnings multiple than CBA throughout this period, has been a natural destination for capital rotating out of an expensive CBA position. Money managers running sector-relative books do not need ANZ to be a great bank in absolute terms to buy it; they need it to be cheap relative to CBA and improving on its own numbers, and it has satisfied both conditions simultaneously.

Moreover, broker views on ANZ have shifted meaningfully over FY26, with several houses moving from cautious to constructive as the cost programme has delivered.

Can the outperformance continue?

Here the picture becomes more genuinely two-sided, and in our view this is the more interesting question for investors than simply explaining what has already happened.

The bull case rests on the cost programme being incomplete. If ANZ is only around halfway through its A$800m target, the earnings tailwind from further cost-out has not yet been fully captured in the share price, and each incremental update showing progress against that target gives the market a reason to keep the rerating going. There is also a case that ANZ’s capital position is strong enough to support a buyback as early as 2027, which would be a catalyst neither CBA nor Westpac currently has on the table given their more constrained payout ratios.

The bear case is that ANZ’s next leg of growth requires something considerably harder than cutting costs, which is winning back mortgage market share it lost over the past several years. That fight is being contested against the aggressive Macquarie in both home loans and deposits, and against a broker distribution channel that structurally favours price competition.

Rebuilding volume in that environment typically comes at the expense of margin, and margin is precisely the lever ANZ has not yet needed to prove it can defend. Add to that a broader macro backdrop where credit growth could soften into the second half of calendar 2026, and the setup for FY27 looks materially different to the one that has driven FY26.

Our conclusion

Our own reading is that FY26 should be understood as the year ANZ won the rerating rather than the year it won the earnings argument outright. The bank has closed a valuation gap that had become difficult to justify, and it has done so on the back of genuine, measurable cost discipline.

Whether that outperformance extends into FY27 will depend far less on further cost-out (a lever with a natural endpoint) and far more on whether ANZ can hold its net interest margin while rebuilding mortgage volume in a market that has become considerably more competitive.

That is a harder test than the one it has just passed, and it is the one that will determine whether ANZ remains the best of the Big 4 or simply the bank that had the most catching up to do.