Australian Bank Shares: Are the Big Four Still Worth Buying?

This Is Investing provides general information only. This is not financial advice. Always consider your personal circumstances and speak with a licensed financial adviser before making investment decisions.

The Big Four Australian banks — Commonwealth Bank (CBA), NAB, Westpac (WBC), and ANZ — have been the backbone of Australian retail investment portfolios for decades. The combination of dividends, franking credits, and general exposure to the Australian economy made them an obvious holding for self-managed super funds and individual investors alike.

But the case for owning them is more nuanced in 2026 than it was in 2015. Here’s the honest picture.

The Traditional Case for Bank Shares

Dividends and franking: Australian bank dividends are fully franked, which means the company has already paid 30% corporate tax on the profits. For Australian shareholders, especially retirees or SMSFs in pension phase, these franking credits can be refunded or offset against other tax — making the effective yield significantly higher than the headline figure.

Economic moat: The Big Four operate in a market that’s extremely difficult to enter at scale. Regulatory requirements, capital requirements, and customer switching costs create genuine barriers that protect the incumbent banks from disruption to their core lending business.

Stability: Australian banks didn’t collapse during the GFC, unlike many of their global counterparts. The four-pillar policy (which prevents the Big Four from merging with each other) has created a stable oligopoly.

The Concerns

Valuation: CBA in particular trades at a premium to global banking peers that’s hard to justify purely on fundamentals. Its price-to-earnings ratio has historically exceeded the other three, and the question of whether that premium is sustainable gets asked regularly.

Housing exposure: The Big Four’s balance sheets are heavily exposed to Australian residential mortgages. If the housing market deteriorates significantly — prolonged unemployment, sharp rate rises, or a genuine correction in property values — bank share prices will feel it.

Competition in deposits and lending: Neobanks and non-bank lenders have chipped away at margins in some segments. This isn’t an existential threat, but it compresses returns.

Dividend sustainability: During periods of earnings pressure (like the pandemic), banks reduced dividends. The income isn’t as guaranteed as it might appear from a 10-year yield chart.

How They Compare

CBA: The highest quality franchise, best digital banking, strongest brand. Also the most expensive. If you’re going to own one bank share, CBA is the blue-chip choice — but you pay for it.

NAB: Best exposure to business banking, which generally carries better margins than residential lending. Trades at a discount to CBA.

Westpac: Has had significant operational challenges and compliance issues over the past five years. Currently in recovery mode. Could be interesting at the right price for patient investors.

ANZ: The most international of the four, with meaningful operations in Asia and New Zealand. More complex business, slightly different risk profile.

The Portfolio Question

Owning all four banks in a portfolio isn’t as diversified as it looks — they’re all exposed to the same underlying Australian economy and housing market. Owning CBA and calling it diversified financial sector exposure is a common mistake.

For investors who want bank exposure without the single-stock risk, the broad ASX ETFs (like VAS or IOZ) include significant bank weightings anyway.

The Bottom Line

Bank shares remain a reasonable component of an Australian investor’s portfolio — particularly for income-focused investors who can use the franking credits. But the days of buying the Big Four and ignoring everything else are probably over. The valuations are higher, the growth runway is narrower, and the risks are more visible than they were 15 years ago.

Buying selectively at reasonable prices, with a clear understanding of the yield and franking maths, still makes sense. Buying at any price because “Australians always own banks” doesn’t.