Are ANZ (ASX:ANZ) and NAB (ASX:NAB) the best ASX bank shares to buy?

A smartly-dressed businesswoman walks outside while making a trade on her mobile phone.

Are you wanting to gain exposure to the banking sector? If you are, then you may be wondering which of the big four banks to buy over the others.

To help narrow things down, Goldman Sachs has run the rule over the sector following recent result releases.

Which big four banks should you buy?

According to the note, Goldman thinks investors should be buying banks with a focus on commercial banking instead of retail banking. This is due largely to aggressive competition for home loans which has been weighing on margins.

It is for this reason that the broker prefers National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) ahead of Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC).

Goldman commented: “We highlight a strong preference for the commercially-focused banks (NAB and ANZ), over the retail-focused banks (CBA and WBC) and margins is where we see the largest divergence, in particular: i) competition for mortgages is currently more aggressive than it is for SME, ii) management commentary suggests high quality, rate inert retail deposit bases (CBA, WBC) have very little room for further repricing in FY22E, while ANZ, NAB suggest there is more room (albeit less than in FY21), and iii) CBA and WBC management talk to further headwinds from the replicating portfolio in FY22E, while ANZ and NAB talk to a more neutral outcome.”

NAB remains the top pick 

The NAB share price remains Goldman’s top pick in the sector. The broker has reiterated its conviction buy rating and $31.15 price target on the bank’s shares.

Based on the current NAB share price of $28.57, this implies potential upside of 9% or ~14% including dividends.

Goldman explained: “Given NAB’s position as the largest business bank, we believe it will benefit more from the continued economic recovery (management is seeing all segments in its Business & Private Bank exhibiting solid growth without sacrificing margin, and asset quality remains strong).”

What about the others?

ANZ’s shares are the broker’s next favourite. Goldman has a buy rating and $31.82 price target on its shares. This compares favourably to the latest ANZ share price of $27.30.

Elsewhere, its analysts have a neutral rating and $25.60 price target on Westpac’s shares and a sell rating and $81.74 price target on CBA’s shares.

In respect to the latter, Goldman commented: “While CBA remains the preeminent retail banking franchise in Australia, its 1Q22 trading update highlighted that even it is not immune from the profitability pressures that are currently particularly evident in mortgages (competition and mix).”

Food for thought for ASX investors.

The post Are ANZ (ASX:ANZ) and NAB (ASX:NAB) the best ASX bank shares to buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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