Macquarie's verdict on the ASX banks: buy, sell or hold?

The big four banks have long been a favourite among Australian investors for their stability and dependable income streams, however in increasingly tough economic times, where do they sit in terms of being solid investments?

Macquarie has run the ruler over the banks ahead of the upcoming reporting season and it's fair to say, from a share price point of view, they're not expecting too many positive surprises.

Broadly the Macquarie analysts said they were expecting "solid" results for the second half of the year, but there were storm clouds on the horizon.

As they said:

Revenue guidance and commentary are likely to be on the softer side, given the material slowing in lending growth and increase in mortgage competition. We expect this will see a greater focus on cost management in FY27-28. In particular, we will be closely watching for commentary on recent lending application trends and competition, any signs of deteriorating credit quality, and updated costs guidance as banks seek to offset the challenging revenue environment. We maintain our underweight stance on the sector with ANZ and NAB our preferred exposures.

Now let's see what they're saying about each bank.

ANZ Group Holdings Ltd (ASX: ANZ)

Macquarie has a neutral rating on ANZ and said they are more positive than consensus estimates for the bank driven by its stronger balance sheet.

That said, they saw a downside risk to earnings from higher impairments in the second half.

They added:

Looking further ahead, we forecast 2% and 7% downside risks to pre-provision consensus earnings in FY27E and FY28E, respectively. This is largely driven by weaker margin trends as ANZ competes for both mortgage and deposits and aligns savings rates following SUN integration.

Macquarie has a $32.50 price target on ANZ shares.

Commonwealth Bank of Australia Ltd (ASX: CBA)

Macquarie said while CBA's elevated valuation, "arguably leaves it most exposed to the housing downturn, we expect its earnings to be the most resilient of the major banks''.

Despite this, they have an underperform rating on the stock and a $111 price target.

Macquarie said the bank might surprise on the upside with its second half results, but they expected its dividend to be increased by just 5 cents to $2.65 given the challenging macro outlook.

National Australia Bank Ltd (ASX: NAB)

Macquarie has a neutral rating on NAB, saying that like its peers there will be headwinds from lower volumes and increased competition.

They added:

While NAB has successfully demonstrated progress in deposit gathering, and strengthening its proprietary channel, the weaker macro outlook and NAB's higher SME exposure would likely keep the market focused on credit quality in the near term.

Macquarie has a price target of $39 on NAB shares.

Westpac Banking Corporation (ASX: WBC)

Macquarie has an underperform rating on Westpac shares and a price target of $30.

They said there was downside risk in FY27and FY28 driven by weaker margins and higher expenses.

They said the bank looked over-valued at current levels, as it was trading on similar metrics to NAB while offering lower returns.

The post Macquarie's verdict on the ASX banks: buy, sell or hold? appeared first on The Motley Fool Australia.

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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