ANZ Shares The Big Four Standout So Far This Year

Australia’s major banks are having a mixed year so far, with ANZ quietly outperforming its peers while Commonwealth Bank’s lofty valuation continues to attract selling pressure and short interest.

The performance gap across Australia’s Big Four banks has widened noticeably in recent weeks. ANZ shares (ASX: ANZ) added 1.1% over the past week, extending its year-to-date gain to 3.46%, a modest but meaningful outperformance in a sector facing genuine headwinds.

By contrast, Commonwealth Bank (ASX: CBA) slipped 1.14% last week to close at A$152.43, deepening its year-to-date decline to 5.39% as markets continue to question whether its premium multiple is sustainable in a higher-rate environment.

Westpac (ASX: WBC) managed a 1.55% weekly gain but remains the sector’s biggest laggard on a year-to-date basis, down 10.78%, while National Australia Bank (ASX: NAB) edged 0.65% lower on the week to sit 9.27% lower YTD. The divergence across all four names reflects a market in the process of repricing relative value rather than making a broad sectoral call.

A Closer Look

ANZ’s outperformance is a reflection in part of valuation, with the bank trading a forward price-to-earnings ratio of approximately 15.1x, more than 35% below CBA’s stretched multiple of 25x, and offers a dividend yield of around 4.4%, making it one of the more attractively priced names in the sector on a risk-adjusted basis.

Brokers including Citi, which carries a Buy rating with a price target in the range of A$39.25 to A$41.00, and Morgan Stanley, which has selected ANZ as its sole Buy recommendation among the Big Four, have both pointed to the bank’s valuation discount as a meaningful buffer against downside risk.

Operationally, ANZ has made tangible progress. The bank has achieved nearly half of its A$800 million gross cost-savings target for FY26, and reported a modest one basis point expansion in its net interest margin during its most recent reporting period, a small but symbolically important result in an environment where margin pressure remains a persistent concern.

Strategic execution has also improved, with the integration of Suncorp Bank progressing alongside the acquisition of Worldline Australia’s merchant payments business, both of which are expected to diversify ANZ’s revenue mix beyond traditional mortgage and deposit products.

CBA, meanwhile, finds itself in an unusual position for a bank of its stature. Its operational credentials remain exceptional, with the bank posting a record full-year cash net profit after tax of approximately A$11.0 billion, an industry-leading return on equity above 13.9%, and delivered a A$5.05 fully franked full-year dividend supported by a CET1 capital ratio of between 11.6% and 12.0%.

Credit quality is also beginning to attract scrutiny at CBA. Loan impairment expenses rose 9% to A$788 million in the most recent full-year period, and home loan arrears edged higher to 0.73%, still manageable in absolute terms, but a directional signal that markets are watching closely as cost-of-living pressures persist across the household sector.

Westpac’s story remains one of structural repair rather than growth. The bank holds a strong CET1 capital ratio of 12.4%, which provides meaningful balance sheet flexibility, and its UNITE cost-reduction program is gradually closing the operational efficiency gap relative to peers. At a forward P/E of approximately 19.0x, Westpac shares are not obviously cheap enough to attract strong conviction buying, even among those who believe the restructuring narrative will eventually deliver.

Macro Backdrop

The sector-wide operating environment adds further complexity to the relative value debate. The RBA’s cash rate remains at 4.35%, and while the central bank has signalled a cautious approach to further tightening, sticky inflation data has kept the door open to additional rate action.

Higher rates provide some support to net interest margins in the near term, but they also slow mortgage origination and increase the probability of credit deterioration across both household and business lending portfolios. System housing credit growth is projected to decelerate to approximately 3% into FY27, reflecting a combination of tax changes on investment property, elevated cost-of-living pressures, and reduced buyer urgency in key metropolitan markets.

All four major banks have built up forward-looking collective provisions to buffer against potential macro shocks, though the size and adequacy of those overlays will be tested if economic conditions deteriorate more sharply than current forecasts suggest.

In Short

The current valuation split across the Big Four is unusually wide by historical standards, and that gap is unlikely to persist indefinitely. For ANZ, the path to further outperformance runs through continued cost discipline, successful integration of its recent acquisitions, and a demonstration that its return on equity profile can narrow the gap with CBA over time.

As the RBA navigates a narrow path between inflation control and economic support, and as credit quality across both household and business lending continues to be tested, the Big Four’s ability to manage competing pressures will define not just their individual share prices, but the broader narrative around Australian banking’s resilience heading into the final quarter of the year.