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Should you buy CBA and these ASX banking shares?

James Mickleboro

Although banking shares have been on fire this year and generated significant returns for shareholders, I don’t believe it is too late to invest.

But deciding which one to invest in is not easy. Are these three ASX banking shares in the buy zone right now?

Australia and New Zealand Banking Group (ASX: ANZ) 

I think recent weakness in the ANZ share price has created a buying opportunity for investors that missed out on its stellar run earlier this year. Especially with the housing market expected to rebound in 2020 and tax cuts putting funds in the pockets of consumers. I expect this to lead to solid mortgage loan growth for the banks, which should provide their bottom lines with a much-needed boost. ANZ is my favourite in the sector due to its current valuation, above-average dividend yield, cost-cutting opportunities, and share buybacks. ANZ’s shares currently offer investors a trailing fully franked 5.9% dividend yield.

Commonwealth Bank of Australia (ASX: CBA) 

Whilst CBA is arguably the highest quality banking share on the Australian share market, it is also the most expensive of the big four at 15.1x earnings and 2.1x book value. I think that this means there is limited upside for its shares over the next 12 months in comparison to the rest of the group. And with a trailing fully franked 5.3% dividend yield, there are more generous yields available from its peers. In light of this, I would class it as a hold for now.

National Australia Bank Ltd (ASX: NAB)

I think NAB would be a great option for income investors that don’t already have meaningful exposure to the banking sector. This is due to its attractive valuation, generous dividend yield, and improving outlook. And as with the others, if the housing market does rebound in FY 2020, I expect solid mortgage loan growth to support NAB’s earnings and dividends. I estimate that NAB’s shares offer a forward fully franked 6.1% dividend yield.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019