Commonwealth Bank vs ANZ: Which is better for passive income?

Commonwealth Bank of Australia vs ANZ shares

Looking for a steady stream of passive income from ASX bank shares? Commonwealth Bank of Australia (ASX: CBA) and ANZ Group Holdings Ltd (ASX: ANZ) are two of Australia’s banking heavyweights, but they aren’t identical when it comes to dividend income, value, or recent momentum. Here’s my take on which could come out on top for investors chasing reliable returns and regular dividends.

The case for Commonwealth Bank of Australia

Commonwealth Bank of Australia, or CommBank, is a true giant in Australian banking. It’s not only the largest of the big four by market capitalisation, but also one of the most recognisable brands in the country. CBA’s operations stretch beyond Australia, with a presence in New Zealand, the UK, the US, as well as several Asian markets. The company’s product suite covers everything from day-to-day banking through to superannuation, insurance, and wealth management offerings.

A couple of numbers really stand out:

• As of the latest data, CBA’s market cap sits at a whopping $253.56 billion, making it one of the ASX’s biggest blue-chips.
• It boasts a fully franked dividend yield of 3.35%. Every dollar you receive from CBA’s $5.05 per share dividend can be boosted by franking credits, making it an appealing income stock, especially for those who can make use of the credits.
• The shares trade on a price-to-earnings (P/E) ratio of 23.14. By big bank standards, that’s at the higher end, but CBA does have a reputation for quality and steady profits.

The company’s long-term dividend history is a feature, with consistent, fully franked payouts stretching back decades.

The case for ANZ

ANZ is no minnow itself – it’s a banking powerhouse spanning Australia, New Zealand, and about 30 other markets. Like CBA, ANZ caters to a huge base of retail, business, and institutional customers, and its international focus means it’s well diversified for an Australian bank.

Here are the highlights I notice:

• ANZ currently offers a market capitalisation of $115.90 billion, making it a significant player, though not in CBA’s league on pure size.
• Its dividend yield is a healthy 4.39%, notably higher than CBA’s. However, recent dividends have only been 75% franked, so the after-tax benefits for certain investors may be less than a fully franked rival.
• ANZ shares change hands at a P/E ratio of 19.18, which is lower than CBA’s. This could appeal to bargain-hunters or income investors keen on getting more yield for each dollar invested.

While ANZ’s trailing dividend is lower than pre-pandemic years and its franking has varied, it remains a popular option for dividend-focused portfolios.

Valuation comparison

Given both sit within the big four banks, it makes sense to hold them up side-by-side. Here are the main numbers at a glance:

Note: Franking levels for ANZ have recently shifted between 56% and 100%, with the most recent payout at 75%.

Also, ANZ’s reported P/E ratio and EPS figure may reflect different earnings measures, so don’t expect those numbers to tally up precisely for valuation comparisons.

Recent share price performance

Comparing recent share price action up to 25 September 2026:

• Commonwealth Bank closed at $150.83 per share as of 25 September 2026, a modest rebound from its recent soft patch, though it’s down -2.92% year-to-date.
• ANZ closed at $37.84 per share on 25 September 2026, having logged a strong year-to-date gain of 6.41%.

Which is the better buy?

For passive income, my nod goes to ANZ. The headline dividend yield is higher at 4.39%, and it comes at a lower P/E compared to Commonwealth Bank. While CBA’s dividends are 100% franked (a huge plus for maximising after-tax returns, especially for retirees or those on lower tax rates), ANZ’s yield advantage is big enough to matter, even with only 75% franking on the latest payout.

ANZ has also shown better share price momentum this year, adding to its appeal for income-focused investors who care about capital preservation or mild growth on top of regular payments.

CBA still has a lot going for it – size, brand, consistency and the comfort of fully franked dividends. But given ANZ’s relatively strong yield and value stats, I’d lean toward ANZ as my pick right now for those seeking the best blend of dividend income and reasonable valuation in the banking sector.

The post Commonwealth Bank vs ANZ: Which is better for passive income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. 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. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial draft. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.