CBA vs NAB – Which is the better investment?

The Australian market is dominated by the “Big Four Banks”, once earning the highly complementary accolade of “the envy of the world.” They remain among the most profitable and strongest banks on the planet, but among the entrants; Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Westpac Banking Corporation (WBC), and ANZ Banking Group (ANZ), two stand out from the pack.

They are both core financial stocks, both pay franked dividends, and both are deeply exposed to the Australian economy. CBA is the premium-quality bank the market keeps paying up for, while NAB is the cheaper bank with a more traditional value-and-income pitch.

Who Are CBA and NAB?

CBA and NAB are not only the largest of the Big Four Banks by market cap, but they are also the best performing over the last five years in share price appreciation, NAB up 60% into the end of Q1 2026, and CBA having doubled on the period, up 100%.

In many ways the Big Four are virtually identical in the products they offer and the markets they serve. However, there are some differences between CBA and NAB that should be of interest to investors ready to make their first investment in one of the Big Four.

Historically, NAB has earned the reputation as the “Bank for Business,” with a relationship based approach and a major focus on SMEs (small to medium sized enterprises) and the agricultural sector.

In contrast, CBA’s massive network of branch offices and ATMs across Australia and its huge customer base has earned the bank the moniker of the “Bank for Retail.” Although both are leaders in digital financial services technology, CBA has a reputation for its continuous innovation, earning the bank the Canstar Bank of the Year Digital Banking Award for 15 consecutive years. CBA has also been a recipient of the Forrester #1 Ranked Banking App.

There is a slight difference in account offerings with NAB being the only one of the Big Four to offer no fee transaction accounts, with the other banks attaching conditions to their no fee offerings.

CBA’s reputation as the Retail Bank is enhanced by the major player status of its retail stock trading platform CommSec. CBA is also reportedly looking to aggressively pursue NAB’s lead in business banking.

What Are Commonwealth Bank of Australia and National Australia Bank Shares Worth?

Determining a stock’s worth is often referred to as “part science, part art.” There are a host of methods and metrics used to approximate a stock’s true “intrinsic value,” or worth. Price history and the P/E ratio are two.

CBA is clear favorite among investors, now trading at around $190 dollars per share, hitting new 52 Week Highs multiple times in 2025 year to date. CBA has a market cap around $315 billion dollars with a current P/E of 32.35 and a five-year average P/E of 20.40.

CBA trades on 27.8x earnings, while NAB trades on 19.0x. That is a major gap. If you are valuation-sensitive, NAB is much easier to defend.

On the current figures, CBA also wins out for operating quality, with a stronger ROE, the better profit margin, and the larger revenue base. That reinforces the long-standing market view that CBA is the better-run major bank.

That is not to say that NAB is weak operationally, but its case depends more on being good enough at a better price rather than being the outright best bank.

Do CBA and NAB Pay Dividends?

Income seeking Aussie investors have long been drawn to the Big Four Banks for their solid dividend performance over time. Looking at five year average dividend yields, CBA and NAB are at the bottom of the list into the end of last year.

• ANZ 5.92%
• WBC 5.27%
• NAB 4.89%
• CBA 3.63%

Both NAB and CBA cut dividends at the onset of the COVID 19 pandemic but have returned to near or payment amounts from a decade ago, with NAB having the slight edge on the current figures. The dividend yield is 3.08% for NAB versus 2.88% for CBA.

CBA vs NAB: Which is the Better Investment?

Right now the analyst community has turned a little bearish on all of the Big Four banks, for a variety of reasons. Valuation is at the top of the list of concerns. The concern over the high P/Es and other valuation metrics is linked to a concern the banks are too big and too entrenched in the Australian economy to achieve the kind of future growth that would justify the valuations market participants are delivering to the Big Four.

Future growth aside, analysts are concerned that coming interest rate cuts and modest economic growth will eat into the banks’ earnings. The Big Four reportedly get 60% of their lending business from home mortgages, which carry significant risks in faltering economies.

Despite reservations, the price action of all the Big Four suggests market participants are placing present performance far ahead of future concerns.

The top two banks in CBA and NAB have led the charge of the Big Four, but which could be considered the better buy?

Why Choose CBA

The bull case for CBA is that it remains the highest-quality major bank in the market. The latest numbers reinforce the usual strengths: dominant retail banking position, strong deposit franchise, disciplined capital management, and technology leadership.

There is also a structural quality argument. CBA continues to push hard on digital capability, productivity, and customer retention. In a sector where products can look similar, execution and platform quality can justify a premium.

CBA’s dominant position in the retail market, larger in size than the business market that NAB caters to, and its reputation for innovation has earned it the reputation of highest quality bank in Australia. Investors looking for stability, potential leaps in technology via CBA’s AI (artificial intelligence) partnership with Amazon Cloud services might prefer CBA.

Why Choose NAB

For investors looking for a better value for their money and better dividend performance, NAB would be worth a look.

The bull case for NAB is that it offers a more balanced valuation-to-franchise trade-off. It is not as highly rated as CBA, but it remains one of the country’s largest banks and still offers major-bank scale, especially in business banking.

NAB’s attraction is that the stock still looks like a bank stock rather than a premium-quality asset with a valuation that leaves little room for error. At 19.0x earnings, it is much easier to justify than CBA’s multiple.

There is also more room for incremental improvement. NAB’s profitability is lower than CBA’s, so if management can keep lifting returns and executing more cleanly, the upside case does not need perfection. It just needs progress.

The progress of the entry of these two banks in the burgeoning field of Artificial Intelligence (AI) is something for Aussie investors to watch. CBA’s rollout has garnered the majority of analyst and financial press coverage while NAB’s efforts have gotten less attention, although a recent report from global consulting firm Accenture highlighted NAB as a “global leader in GenAi deployment.” In contrast to AI targeted to process and analyse existing data, GenAi can create new content, like a summary of a presentation, accounting reports, or scriptwriting.

In Short

For most valuation-conscious investors, NAB probably has the stronger pure investment case today. The discount to CBA is meaningful, the yield is slightly better, and you do not need the bank to become “the best” for the shares to work. CBA is still the stronger franchise, but that is already heavily reflected in the share price. If the best at all costs is your motto, then CBA is the better fit.