Better buy: Westpac or CBA shares?

If you’re looking for banking sector exposure, then Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) shares are likely to have crossed your mind.

But which would be the better buy? Let’s see what analysts are saying.

Should you buy Westpac or CBA shares?

Firstly, it is worth highlighting that it is widely agreed that there is a gulf in quality between these banks.

CBA is regarded as Australia’s highest quality bank by some margin. So clearly, all else equal, you would want to own CBA ahead of others in the sector.

But the share market isn’t equal.

Because of its quality, CBA shares trade at a significant premium to the rest of the big four banks. Unfortunately, this means that getting hold of the bank’s shares at a fair price can be difficult.

For example, at present none of the major brokers have a buy rating on the shares of Australia’s largest bank.

The most bullish is UBS, which has a neutral rating and $105.00 price target. This still implies potential downside of almost 11% for investors over the next 12 months.

And while brokers aren’t overly enamoured with Westpac, there are a couple of brokers that are tipping Australia’s oldest bank as a buy.

One of those is Ord Minnett, which has an accumulate rating and $28.00 price target on Westpac’s shares.

Based on its current share price, this implies potential upside of almost 16% for investors between now and this time next year.

In addition, the broker is forecasting a fully franked $1.45 per share dividend in FY 2024. This equates to a 6% dividend yield and stretches the total potential return to approximately 22%.

Overall, at current prices, analysts appear to believe investors would be better buying Westpac shares over CBA shares.

The post Better buy: Westpac or CBA shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in 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 no position in any of the stocks mentioned. 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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