Which ASX bank stock is the best buy right now?

It has been a down year across the board for many ASX bank shares. 

Bank stocks make up a core part of many investors’ portfolios. This means that when they fall, they can drag down your portfolio’s overall performance. 

Not only do the big four dominate market share, but they are also targeted for relatively stable earnings and dividends.

Let’s look at how they are performing this year, and the lesser-known bank stock earning positive ratings from experts. 

Big four bank shares struggle

Since the start of 2026, the big four bank shares have underperformed the broader ASX 200. 

Year to date: 

• Commonwealth Bank of Australia (ASX: CBA) is essentially flat with the start of the year
• National Australia Bank (ASX: NAB) is down nearly 14%
• Westpac Banking Corporation (ASX: WBC) is down over 10%
• Anz Group (ASX: ANZ) shares have fallen 6%. 

Why are bank stocks down?

ASX bank stocks have weakened in 2026 as investors grapple with the implications of a higher interest rate environment. 

While rising rates can support bank margins, they also increase borrowing costs for households and businesses, raising concerns about slower loan growth and a potential increase in bad debts.

Investors are increasingly concerned about the risk that mortgage stress could rise if rates remain elevated for an extended period, particularly given Australia’s high household debt levels. 

At the same time, bank valuations had reached historically rich levels following a strong run-up in share prices in 2025, leaving little room for disappointment. 

As a result, even solid earnings results have failed to prevent profit-taking across the sector, sending ASX bank shares lower.

What are brokers saying?

There is little optimism from brokers surrounding the big four ASX bank stocks. 

CBA shares recently were listed as a hold by Red Leaf Securities, while NAB shares were listed as a sell by the team at Catapult Wealth. 

Elsewhere, Morgan Stanley has a sell rating on CBA, NAB and Westpac. 

The only glimmer of upside appears to be ANZ. 

UBS recently upgraded ANZ shares to a hold rating with a $36.50 price target.

This indicates a modest 7% upside from current levels. 

The surprising option emerging as a buy

While the big four bank stocks appear to have little upside, there is plenty of optimism about smaller rival bank stock Judo Capital (ASX: JDO). 

Its share price is down 20% year to date, however brokers are tipping a rebound for this smaller bank. 

The team at Morgans recently retained their buy rating on this small business lender’s shares with an improved price target of $2.15.

From current levels, this indicates an upside of 50%. 

Looking ahead, the broker believes Judo Capital will deliver strong earnings growth over FY 2026 – FY 2028.

The post Which ASX bank stock is the best buy right now? appeared first on The Motley Fool Australia.

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• 3 ASX shares Warren Buffett would probably love right now

Motley Fool contributor Aaron Bell has positions in National Australia Bank. 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.