The Best Financial and Bank Stocks: How MQG, MPL Stack Up Against Big Four

The ASX financial sector has much to offer investors of all backgrounds, with access to some of the largest and most established companies on Aussie markets. Risk adverse investors with long term horizons have only to look at Australia’s globally renowned “Big Four” banks, along with a smattering of smaller regional banks and an internationally acclaimed investment bank. The Big Four are considered the best in the world based on the difference between the bank’s assets and its liabilities to capitalisation.

Although some younger investors may find banks boring, they hold an unparalleled advantage in that the demand for the services both traditional and investment banks provide will never fade away. The insurance companies within the list share the same advantage of virtually guaranteed demand over time. The public cannot go without home, auto, and health insurance. Both banks and insurance companies take in cash that can be held by the financial institution for decades before payout. Yet many investors find insurance stocks equally boring.

That does not make financial stocks automatically defensive or low risk.

Despite demand remaining ever-present, banks are exposed to interest rates, credit losses, housing markets and economic growth. Insurers face claims inflation and regulatory risk, whilst investment banks can be affected by financial-market conditions.

Those differences are particularly important in 2026, with Australia returning to a rising interest-rate environment, with the Reserve Bank of Australia cash rate at 4.35% following three increases through the first half. Higher interest rates can support parts of bank earnings but also increase pressure on mortgage holders and businesses.

Best Australian Financial Stocks

At the centre of our picks are the Big Four banks of Commonwealth Bank, National Australia Bank, Westpac and ANZ, but the sector extends well beyond traditional banking. We also see a strong place for exposure to global investment banking through Macquarie Group, health insurance through Medibank Private and the infrastructure underpinning Australian financial markets through ASX Limited.

Here’s how the top names stack up.

Macquarie Group Limited (ASX: MQG)

Macquarie Group shares are substantially different from Australia’s Big Four retail banks and is our pick of the best all around financial stock of the moment. Macquarie Group has the distinction of being Australia’s sole investment bank with an international presence, operating in 34markets.

Macquarie has four operating business units: banking and financial services, asset management, commodities, and renewable investments; targeting the infrastructure, energy, technology, and commodities sectors.

Macquarie is the standout if you want more than a domestic mortgage-bank exposure. It gives investors a mix of asset management, commodities and global markets, investment banking, infrastructure, energy transition, private capital and retail banking.

That diversification is the main appeal. When the Australian housing cycle is dull, Macquarie can still benefit from global markets, infrastructure, commodities volatility and capital-markets activity. Its FY26 result was strong, with Macquarie delivering one of the strongest results among the companies on this list. Macquarie reported A$4.847 billion of full-year profit, up 30%, with a record second-half result and a A$4.20 final dividend.

Looking at the business unit spread, Macquarie Asset Management generated a net profit contribution of $2.602 billion, while Commodities and Global Markets produced $4.221 billion and Macquarie Capital contributed $1.491 billion.

The risk is that Macquarie is more cyclical than the big four. Earnings can swing with trading conditions, asset realisations, deal flow and market sentiment. But as a long-term financials pick, it has the best growth profile in this ASX group.

ANZ Group Holdings (ASX: ANZ)

ANZ enters the second half of 2026 as arguably the most substantial transformation story among Australia’s Big Four banks and is our pick from a value perspective. The acquisition of Suncorp Bank substantially expanded ANZ’s Australian retail operations, while new Chief Executive Nuno Matos is implementing the broader ANZ 2030 strategy.

ANZ shares also looks like the cheapest of the big four on forward valuation despite posting the best return over the past 12 months (+21.5%). It trades on a forward P/E of about 14.6, has the highest dividend yield among the ASX banks in this table at 4.4%, and trades at only 1.6 times book value. That makes it the value case. Whilst CBA’s argument is based largely on maintaining an already high level of performance. ANZ’s case depends more heavily on management improving returns from the assets and customers it already owns.

The latest result showed A$3.65 billion of statutory profit and A$3.78 billion of cash profit for 1H26, with a 12.39% CET1 ratio. ANZ also reduced its cost-to-income ratio to 49.4%, an important indicator for investors assessing whether management’s simplification efforts are beginning to deliver results.

The risk is execution. ANZ still needs to prove it can improve returns, control costs and close the valuation gap.

Medibank Private Limited (ASX: MPL)

Medibank Private gives a very different form of financial exposure to others on this list, and is our pick of the best defensive stock in the sector.

The federal government privatized Medibank in 2014 and the MPL share price is up 138% since listing, making dividend payments every year. The five-year average dividend yield is 4.12%.

In addition to its insurance for hospitalisations and ancillary medical issues from dental to optical to physical therapy, the company offers a variety of healthcare treatments and healthcare management services, as well as temporary insurance for overseas students and visitors.

Medibank has two operating segments, Medibank and ahm. The company adds pet, travel, and life insurance to its range of offerings an it has a defensive customer base, low beta, high ROE, and less direct exposure to the mortgage cycle.

With FY26 earnings due out on 20th August, there will be plenty of eyes on the upcoming financials. In the most recent period, (six months ended 31 December 2025) Medibank reported health insurance revenue of $4.296 billion, up 4.4%; total revenue excluding net investment income of $4.504 billion, up 5.5%; and NPAT attributable to shareholders of $302.9 million, down 11%. Medibank also declared a fully franked interim dividend of 8.3 cents per share, up 6.4%.

The interest here is that Medibank benefits from a different set of economic drivers than banks. Demand for healthcare is less closely linked to discretionary consumer spending than many industries., and Australia’s growing and ageing population can also support long-term demand for health insurance and medical services.

Westpac Banking Corporation (ASX: WBC)

Westpac is Australia’s oldest bank, tracing its history to the Bank of New South Wales in 1817. Like ANZ, Westpac has spent recent years simplifying its operations and investing heavily in technology and operational improvement, and now combines a large home-lending franchise with consumer, business and institutional banking operations.

Whilst Westpac shares appear cheapest on current P/E, markets are forward looking, and the forward P/E is expected to sit above both ASX is a unique financial stock because it owns critical market infrastructure. That gives it a strong competitive position and high margins.NAB and ANZ over the coming year. That means shares are set to become more expensive vs peers if future revenues come in as expected, and stock prices stay relative.

The 1H26 result showed a 12.4% CET1 ratio and a 77 cents fully franked interim dividend. That supports the income case. But Westpac has not clearly pulled ahead on growth, margins or returns. Upcoming figures will be closely watched.

National Australia Bank (ASX: NAB)

NAB shares look like one of the best banks on the ASX right now. It is not as expensive as CBA, and on a forward P/E it is cheaper than all others bar ANZ, but with a stronger business-banking skew than Westpac or ANZ. That gives NAB a useful position if business credit growth holds up and margins remain disciplined.

The latest half-year result was mixed but still credible. NAB reported A$2.639 billion of cash earnings, a CET1 ratio of 11.65%, and a cash ROE of 8.5%. Those figures were also affected by a $949 million large notable item associated with a change in the treatment of capitalised software. Excluding large notable items, cash earnings were $3.588 billion, up 2.3% from the previous half and broadly flat against the prior comparable period.

The risk is that the same business lending exposure that differentiates NAB can become a weakness during an economic downturn, and NAB added $300 million to forward-looking collective provisions during the latest half, reflecting greater economic uncertainty.

Commonwealth Bank of Australia (ASX: CBA)

CBA remains the highest-quality Australian bank and deserves a place in any serious discussion about best financial stocks, even if it is not our top pick. It has the strongest retail franchise, leading digital capability, a dominant mortgage and deposit position, and the best profitability among the big four.

Its scale, deposit funding, technology platform and consistent profitability make it difficult to ignore, but the well trod problem is valuation. Those who want a piece of CBA have to pay substantially more for earnings than for profits generated by other Australian banks. With this a well known argument that has yet to set the stock back, the investment argument is less about finding a bargain and more about deciding whether CBA’s business quality justifies that premium.

Looking closer at valuation, CBA trades at 28.5 times earnings and 3.9 times book value, which is a huge premium for a bank. Future earnings are not expected to get much cheaper, with a 26.5 forward P/E higher than the remainder of the list, with a dividend yield that is the lowest. 1H26 result were solid, and it declared a A$2.35 fully franked interim dividend, with a CET1 ratio of 12.3%.

The price target on the street sits significantly lower than the current CBA share price, and the stock has traded sideways over the past 12 months, underperforming it’s peers on both major financial goals of capital appreciation, and dividends. Could this be set to change following upcoming FY results?

ASX Limited (ASX: ASX)

ASX Limited occupies a unique position within Australia’s financial sector, operating critical infrastructure underpinning Australian equity and derivatives markets, including trading, clearing and settlement services.

That historically gave ASX shares many of the characteristics investors look for in a high-quality financial infrastructure business:

The ASX has minimal competition and the massive “barriers to entry” virtually assure it never will, but the ASX is at moderate risk from regulators seeking to break its virtual monopoly on the clearing and settlement functions.

The current investment case is not as clean as it used to be, with ASX’s half-year result showing underlying net profit after tax of A$263.6 million, and the board determining a 101.8 cents interim dividend. The problem is that the market remains focused on technology renewal, regulatory scrutiny and cost growth.

Technology modernisation is also expensive. ASX expects FY2026 total expense growth of between 20% and 23%, alongside capital expenditure of approximately $170–180 million.

Why financial stocks remain important

For traders looking to invest in Australian financial and banking stocks the ASX offers four of the largest and safest banks in the world, along with major international and domestic insurance companies and a host of financial technology companies.

Both the banks and the insurance companies have a major advantage over many stocks in other sectors in that the demand for banking services and home, auto, health, and other forms of insurance will never go away.

The traditional banking model is straightforward. Banks take deposits from customers and lend money to households and businesses. They earn interest on loans and pay interest to depositors and other funding providers. Modern banks are more complex, offering a range of other services, but the core elements hold true.

Insurance companies operate differently but benefit from another recurring financial need: households and businesses regularly pay premiums to protect themselves against financial losses.

Meanwhile, businesses such as Macquarie and ASX give investors exposure to asset management, investment banking, commodities, trading and the infrastructure required for financial markets to operate.

The result is a sector that can provide income, growth and diversification, but the risks vary substantially from stock to stock.

Interest rates are again a major theme for financial stocks, and we have taken a separate look at how the banks typically perform under a higher rate environment. Hint: it is not always good, and the latest Big Four results show both sides of the equation.

How Do US listed Bank Stocks Compare?

Taking a look at the data, the US bank stocks are cheaper and stronger on recent momentum than the ASX-listed financials overall, yet the ASX data is behind that of the US banks who have recently reported.

JPM, BAC, WFC and C all trade on lower P/E multiples than CBA, NAB and WBC, while Citi and Wells Fargo also trade at notably lower price/book ratios. CBA remains the clear ASX quality premium stock, but at 28.5x earnings and 3.9x book, it is much more expensive than JPM at 14.8x earnings and 2.6x book, even though JPM is the global quality leader.

The US banks also show stronger recent growth signals. JPM, BAC, RY, WFC and C all had double-digit quarterly revenue growth YoY, while the ASX banks were more subdued: CBA at 6.6%, NAB at 8.7%, Westpac at 1.5%, and ANZ negative at -2.1%. The one-year share price moves also favour the US stocks, with HSBC, Royal Bank of Canada, Citi, Bank of America and JPM all outperforming ASX peers over the period.

That said, the ASX financial stocks have a different appeal. The big four banks are simpler, highly profitable domestic franchises, and investors often prize them for dividends, franking credits and oligopoly-style market positions.

NAB and ANZ look the most comparable to the cheaper US banks from a valuation perspective, while CBA is more like a premium-priced quality stock. Macquarie is the ASX outlier because it is less like a traditional bank and more comparable to a global financial platform, which gives it better growth optionality.

FAQs

What Are Financial Stocks?
Financial stocks are shares in companies that offer financial services such as banking, insurance, loans, credit cards, payment services and more. The financial sector is a core part of the global economy so financial stocks should play a key part in any portfolio.

How Do I Buy Financial Stocks?
To buy financial stocks you will first need to open an account with a regulated australian broker . The majority will offer a wide range of financial stocks. You will then need to do your own research to determine which are the best for you to invest in.

Are Financial Stocks a Good Investment?
Any investment involves some degree of risk – prices can go down as well as up. However the financial sector is at the core of the global economy and is seen by many as a safer investment that other sectors. The financial sector is heavily regulated and has performed well over the past 30 years.

Which Big Four bank is best in 2026?
There is no one best bank stock in Australia. CBA offers arguably the strongest overall franchise, but frequently trades at a premium valuation. NAB provides strong business-banking exposure, ANZ offers greater turnaround potential, whilst Westpac combines a strong capital position with a major technology and efficiency transformation.