CBA vs NAB: Which ASX Bank Looks Better Right Now?

CBA looks like the higher-quality franchise, but NAB currently offers better value and income for most investors.

As of late October 2026, Commonwealth Bank (ASX: CBA) trades around $162 with a market capitalisation near $270 billion, while National Australia Bank (ASX: NAB) sits around $41 with a market capitalisation near $125 billion. Both have delivered solid results in a challenging environment of slowing growth, elevated rates earlier in the cycle, and rising customer hardship. However, their investment cases diverge sharply on valuation, yield, and risk-reward.

Also read | ASX bank stocks

Recent Performance Snapshot

CBA reported a strong FY26 (year ended 30 June 2026): cash NPAT of roughly $11 billion (up 7%), pre-provision profit up 6%, and ROE at 14.0%. It reported system-or-better growth across all five core domestic products: home loans, business lending, consumer finance, household deposits, and business deposits. The fully franked dividend rose to $5.05. Hardship arrangements climbed to around 147,000, while the bank continued investing heavily in technology, scams and fraud protection, and AI.

NAB’s full-year results, for its September year-end, are due around 5 November 2026. Its Q3 trading update showed cash earnings of about $1.83 billion, up modestly excluding one-offs, solid volume growth, and a CET1 ratio of 11.93%. The bank continues to focus on business banking strength. It has also flagged restructuring, including job cuts, with an expected ~$300 million pre-tax charge in FY27 as it targets productivity and cost control.

Historically, CBA has been the standout performer among the Big Four on total shareholder returns over multi-year periods, reflecting its scale, retail dominance, including CommSec, and superior profitability. NAB has remained competitive, particularly through its business and SME franchise.

How the Two Banks Compare

CBA trades on a trailing or forward P/E of around 25x, offers a cash dividend yield of roughly 3.1%, and delivers an ROE near 14%. Analyst sentiment is broadly negative, with a Strong Sell consensus and average price targets around $125–126 that imply significant downside.

NAB trades on a P/E closer to 20–21x, provides a higher cash yield of about 4.1–4.2%, and generates an ROE in the 10–11% range. Analyst sentiment is more mixed, generally around Hold, with targets clustered nearer to the current share price.

CBA consistently leads on profitability metrics, including higher ROE, stronger margins, and better returns on assets. NAB’s clear advantages are valuation, with a meaningful discount to CBA, and income, through a noticeably higher fully franked yield.

Strengths and Risks

CBA: Strengths and Risks

Strengths

• Best-in-class franchise quality and scale advantages.

• Retail banking leadership and consistent execution under Matt Comyn.

• Strong capital and liquidity positions.

• Historically superior returns that have helped justify its premium valuation.

Risks

• Stretched valuation, with the market pricing in continued outperformance.

• Potential margin compression and slower credit growth.

• Rising customer hardship could increase credit risks.

• A relatively low dividend yield compared with the other major banks.

NAB: Strengths and Risks

Strengths

• More attractive relative valuation and higher income.

• Leading position in business banking and agribusiness.

• A more reasonable earnings multiple than CBA.

• Potential efficiency gains from restructuring and cost-control initiatives.

Risks

• Lower structural profitability than CBA.

• Greater exposure to business credit cycles.

• Cost-cutting initiatives must be executed without disrupting growth.

• Recent results have been solid but less impressive on pure ROE metrics.

Both banks face common sector headwinds, including a soft housing market in some areas, potential further interest-rate adjustments, rising impairment charges if the economy weakens, regulatory scrutiny, and competition from non-banks and digital players. Their capital positions remain strong.

Which Looks Better Right Now?

For quality, long-term compounding, and investors prioritising ownership of a leading Australian bank, CBA remains the stronger business. Its ROE and franchise advantages are real. However, at roughly 25x earnings and with a yield near 3%, its margin of safety appears thin. Expensive CBA shares can still perform, but current analyst targets suggest limited near-term upside.

For value, higher income, and potentially more attractive risk-reward, NAB looks preferable right now. Its yield above 4% is more competitive, its P/E discount to CBA is material, and its business banking focus provides a different earnings mix. Analyst sentiment is also less hostile.

Neither stock is a high-conviction buy at current prices according to many brokers, with CBA particularly exposed to concerns about valuation relative to growth expectations. Income-focused or valuation-sensitive investors may favour NAB, while those prioritising franchise quality and willing to pay a premium may continue to favour CBA or watch for a pullback.

Bottom Line

CBA is the higher-quality bank, but NAB currently looks like the more attractive proposition on valuation and dividend yield.

Investors should monitor NAB’s full-year result in early November, alongside further commentary from both banks on credit quality, margins, and customer hardship. Bank stocks remain sensitive to economic conditions and the interest-rate cycle, so investment decisions should account for individual time horizons, income needs, risk tolerance, and portfolio diversification.

This article is for informational purposes only and does not constitute personal financial advice. Consider conducting your own research or consulting a licensed financial adviser.

(Source : Company Reports)