ASX 200 bank shares: Buy, hold, or fold?

ASX earnings fans are likely having a great month as reporting season for S&P/ASX 200 Index (ASX: XJO) banks nears its end.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) kicked off the action among the big four, posting its full-year earnings late last month. Westpac Banking Corp (ASX: WBC) followed suit earlier this week and National Australia Bank Ltd (ASX: NAB) posted its earnings this morning.

Next up will be Commonwealth Bank of Australia (ASX: CBA). The financials giant will drop its first quarter update next week after reporting in August.

So, with most of the market’s biggest banks having now dropped their full-year earnings, are the ASX 200 financials giants worth buying? Here’s what experts are saying.

Are ASX 200 bank shares a buy right now?

ASX 200 banks could be a buy, according to some experts, while others warn investors not to over-expose themselves to the sector.

Head of investments and capital markets at VanEck, Russel Chesler warns non-performing home loans could rise as the property market slows down, The Australian reports. The expert was quoted as saying:

Higher costs including wage inflation are limiting the expansion of bank profits. Looking forward the significantly higher interest rates will see loan growth continuing to slow and bad debts will increase.

We do not believe these risks are fully factored into the major bank’s share prices.

That’s in comparison to many previous predictions that rate hikes would allow ASX 200 banks to reprice their loan offerings, thereby increasing their net interest margins (NIMs) and profits.

However, soaring NIMs haven’t quite come to fruition just yet. The sector was bolstered when Bank of Queensland Ltd (ASX: BOQ) reported a final quarter NIM of 1.81% last month. Though, that’s since proven to be among the best of the bunch.

ANZ reported an exit NIM of 1.8% and that of NAB reached 1.72%.

Meanwhile, Westpac saw a NIM of 1.9% in the second half. However, its full-year NIM dropped 17 basis points to 1.87%.

Still, on an individual level, many top brokers are bullish on most of the ASX 200’s big four banks.

What do brokers expect from the big four?

Morgans added CBA shares to its November ‘best ideas‘. The broker believes the bank is “the highest quality bank and a core portfolio holding for the long term”. Though, it did note the biggest bank is also the most expensive on key valuation metrics.

Meanwhile, Westpac retained its place on the monthly list. The broker said it has “the greatest potential for return on equity improvement… if its business transformation initiatives prove successful”.

Citi and Goldman Sachs also tipped Westpac shares as buys with as much as 16% upside following the bank’s full-year results, my Fool colleague James reports.

The pair also expect big things from ANZ shares. They both believe the smallest of the ASX 200 big four banks could up its dividends in coming years, with Citi slapping it with a buy rating and Goldman Sachs remaining neutral on the stock.

Finally, Goldman Sachs believes NAB shares are a buy right now. It expects the bank to outperform due to its exposure to commercial real estate, helping it to grow its dividends.

The post ASX 200 bank shares: Buy, hold, or fold? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper 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 Goldman Sachs. 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 Scott Phillips.

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