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Are ASX bank stocks back in favour after earnings season?

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A woman looks questioning as she puts a coin into a piggy bank.

ASX bank stocks are back in the spotlight after reporting stronger-than-expected profits in their latest financial updates.

National Australia Bank Ltd (ASX: NAB) was the last of the big four Aussie banks to post its latest update for this earnings season ahead of the market open on Wednesday. The banking giant revealed a 15% hike in its cash earnings for the first quarter of FY26 and a 6% increase in revenue. 

The announcement follows Westpac Banking Corp (ASX: WBC), which posted its first-quarter results on Friday last week. The bank reported a 5% increase in unaudited statutory net profit and a 6% increase in net profit excluding notable items. Westpac CEO Anthony Miller said, “We are optimistic on the outlook for the economy and expect demand for both business and household credit to remain resilient.” 

Commonwealth Bank of Australia (ASX: CBA) posted its half-year results last week, where it revealed a 6% increase in cash net profit to $5,445 million. The bank also lifted its interim dividend by 4% to $2.35 per share. CBA’s CEO, Matt Comyn, said that economic growth strengthened during the half, “driven by increases in consumer demand and rising investment in AI and energy infrastructure”.

ANZ Group Holdings Ltd (ASX: ANZ) also announced its latest quarterly update ahead of the ASX open on Thursday last week. The bank reported a first-quarter cash profit of $1.94 billion, up a whopping 75% from the second-half average of FY25.

The results send share prices flying

NAB shares closed 3.8% higher after the company’s results announcement yesterday. And this morning they’re climbing again. At the time of writing, the shares are up another 2.38% to $48.26.

Westpac’s announcement pushed its share price 1.3% lower for the day. At the time of writing this morning, the shares are up another 2.25% to $41.72 a piece.

Meanwhile, CBA shares soared nearly 6% higher on the back of its announcement. At the time of writing on Thursday morning, the shares have dropped 0.41% to $179.37.

ANZ shares jumped 8.5% the day it released its update. At the time of writing, the shares are up 1.76% for the day at $39.92.

What’s next for ASX bank stocks this year?

This earnings result season has been a welcome recovery for the banking majors after overall banking sector weakness late last year caused share price declines across most of the sector. 

But analysts aren’t optimistic that the ASX bank stocks will continue climbing this year.

Analysts’ sentiment is split between neutral and strong sell stances on NAB shares, with an average target price of $41.66. That implies a potential 13.5% downside at the time of writing.

They’re also split on Westpac shares. Out of 16 analysts, eight have a hold rating, and another 8 have a sell or strong sell rating. The average target price is $35.03, implying a potential 16.12% downside over the next 12 months from the current trading price.

The outlook for CBA shares is much more negative, with the majority of analysts holding a sell or strong sell rating on the stock. The average target price is low too, at just $131.20 per share. This implies a potential 26.87% downside at the time of writing.

ANZ shares hold the most promise. Most analysts are split between a hold position and a buy or strong buy position. The average target price still represents a drop from the share price at the time of writing, though. Analysts have tipped an average 7.21% decline to $37.04 this year.

The post Are ASX bank stocks back in favour after earnings season? appeared first on The Motley Fool Australia.

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