Which ASX Big four Bank Stock to Buy?

Let’s take a look at a question many investors would ponder: Which ASX Big Four Bank Stock to Buy? If you’re not invested in a Big Four Bank, you’re missing out on among the most reliable dividend payers and bumper profit makers – not necessarily from a margin perspective, but from raw numbers (CBA makes over $10bn a year). And while many have said they were overvalued, the market meltdown over Trump tariffs has led to a rare opportunity to pick one of them up at a discount.

But which one to choose? At first glance, there may appear to be little difference other than branding. Yes, CBA does appear to be ‘bigger’ than its peers, but is there anything else different about them. There actually is if you go beyond scratching the surface.

In this article we will answer that question. But first, acknowledging many are looking for different traits amongst bank stocks, we’ll look at each individual bank and provide one reason to buy each individual Big Four Bank as well as one reason not buy that Bank. Then we’ll look at our favourite right now.

 

CBA (ASX:CBA)

Why you might buy CBA?

Where do you start? There are plenty of obvious reasons including CBA’s loan book and market presence. And probably the most important is its high dividends, of over $4 a share consistently. But if we had to pick one thing that may not stand out at first glance, it is that the bank generates a far lower proportion of its loans from mortgage brokers, and a higher amount in house. And this means more money the bank keeps on account of not having to pay trailing commissions.

Mortgage brokers might appear to be a necessarily evil that the big four banks need to live with, or miss out on a larger number of customers. After all, they write nearly three-quarters of all loans in Australia. CBA makes far less of its book from brokers compared to its Big Four peers – just 33% in the most recent 6 month period. Moreover, the bank is looking to increase it by upping its digital loan capabilities (particularly through its BankWest brand) and by luring ex-brokers in house with base salaries of up to $150,000 and potential for further bonuses.

 

Why you might not buy CBA?

The only real reason not to is be that some say CBA is overvalued, and you might believe naysayers are right and that it would be better to buy another Big Four Bank. Now, there is less talk about that in light of the bank’s fall in light of the market sell off, but it is worth pondering this question. This could be a chance to buy the biggest Big Four Bank at a bargain price, but it could also represent a ‘falling knife’.

CBA skeptics have legitimate points to boast of including the lack of profit growth to justify its valuation, that its multiples (particularly P/E and P/B are ahead of its peers) and certain technical indicators. Conversely, there were reasons you could justify its valuation including its bumper profits. We stated last November that for CBA shares to fall significantly there’d have to be some doomsday scenario. Well, it only took the President of the United States appearing keen to bring global trade back to 1930s levels for CBA to fall, so we were right there.

But ultimately, we might leave this question with a quote from Warren Buffett. ‘Price is what you pay value is what you get’. It is easy to look at the bank’s market capitalisation and share price, but it is important to look at all the other factors, those mentioned above and others. And of course, the same goes for all other Big Four Bank stocks.

 

Westpac (ASX:WBC)

Why you might buy Westpac?

Westpac’s relatively new CEO Anthony Miller is putting his stamp on the Big Four bank and looking to outperform where the bank has underperformed in years to come. These have included brand rationalisation, a pursuit to grow the proportion of mortgages on its book generated in-house (i.e. without brokers) as well as a project by the name of Unite. It will cost $3bn over this and the following 3 financial years but will unite the >100 operating systems across Westpac’s core brand and others (i.e. St George, BankSA, Bank of Melbourne). 

 

Why you might not buy Westpac?

Westpac has run the most afoul of regulators this decade, copping a $1bn+ fine in 2020 for breaches of AML/CTF laws. That was five years ago you might say, but it has been closely watched since to implement changes. Moreover, if we had to bet our life savings on which bank will next run afoul of regulators, we would say Westpac.

Have you heard of Project Sentinel? It is a deep dive review of mortgages that the bank originates in house, with concern that some borrowers may have misrepresented income and other crucial information. Last year, Westpac’s RAMS franchise was closed to new business after a regulatory probe, and these issues triggered the current review. ASIC is continuing to investigate what may or may not have gone on at RAMS.

 

 

ANZ (ASX:ANZ)

Why you might buy ANZ?

For a start ANZ is the cheapest bank (by P/E multiple and market capitalisation). And ANZ arguably has the most catalysts for top and bottom line growth in the short to medium term. The two key steps are the integration of Suncorp’s retail arm with ANZ’s, a step that’ll add 1m customers, as well as the roll out of ANZ Plus.

This is 35% cheaper to run than legacy technologies and the savings (in money and time) could be passed onto customers. By the end of 2026, it is anticipated that the entire retail bank will be on Plus which should be at least 7m customers (6m with ANZ prior to the Suncorp acquisition and 1m with Suncorp before the acquisition). 

The central promise of the platform was that would-be mortgagees could apply for loans on their phones and finalise in less than an hour.

 

Why you might not buy ANZ?

ANZ has over exposure to New Zealand with 17% of revenue from there, and that it operates in its own right rather than through an independent subsidiary, plus that it has a significant market share with over 25% in loans and deposits. That is more than even CBA has in loans in Australia. 

The New Zealand economy is not in good shape right now, emerging from a recession in 2024 and having 32,000 fewer employed people than a year ago. Several thousands of Kiwis have moved to Australia to escape. This is the weakest performance (barring COVID) since the early 1990s.

In FY24, ANZ still made a NZ$2bn+ profit both on underlying and statutory bases, but its expenses increased 6% driven by inflationary pressures. But the bank noted that lending was subdued in a very competitive market, due to a combination of lower commercial property lending and customers remaining cautious about taking on more debt.

 

NAB (ASX:NAB)

Why you might buy NAB?

NAB has a huge business bank, standing at A$230bn and representing a market share of 21%, greater than any of its Big Four peers even CBA. As interest rates decline, businesses will be more eager to take on debt and NAB is well poised to win over this business, better than any of its Big Four peers. 

 

Why you might not buy NAB?

The business bank is also a reason not to buy NAB. Or more specifically, the fact that it is facing big competition. In 2024, NAB wrote $5bn fewer business loans in 12 months, saw an 0.7% market share retreat as other Big Four Banks and other smaller banks like Judo (ASX:JDO) pick up market share. Moreover credit quality is deteriorating due to supply chains. 

 

So, Which ASX Big Four Bank Stock to Buy?

If you want dividends, there’s no question that CBA is the Big Four Bank Stock to buy. It arguably offers the most upside potential right now, as it could retrace back to levels seen earlier this year before the Trump tariffs caused a major market sell off. If you want stable growth over a few years, ANZ has the most potential of all Big Four Bank Stocks given the roll out of ANZ Plus.

 

What are the Best ASX Stocks to invest in?

Check our buy/sell tips