National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) are both major ASX bank shares with large customer bases, strong brands, and attractive dividend profiles.
They are also both trading well below their 52-week highs.
Both shares definitely have appeal, but I think one stands out as the better buy.
The numbers
NAB shares are currently trading around $38.57.
According to CommSec, consensus estimates suggest NAB could generate earnings per share of $2.43 in FY26 and $2.53 in FY27.
That puts NAB on a price-to-earnings (P/E) ratio of around 15.9 times FY26 earnings and 15.2 times FY27 earnings.
On the dividend side, CommSec estimates dividends per share of $1.70 in FY26 and $1.72 in FY27. That implies forward dividend yields of around 4.4% and 4.5%.
Westpac shares are trading around $35.69.
CommSec shows the consensus forecasting earnings per share of $2.12 in FY26 and $2.14 in FY27. That puts Westpac on a P/E ratio of around 16.8 times FY26 earnings and 16.7 times FY27 earnings.
Forecast dividends of $1.54 in FY26 and $1.55 in FY27 imply forward yields of around 4.3% in both years.
On these numbers, NAB actually looks slightly more attractive to me. It has the lower forward earnings multiple and a slightly higher forecast dividend yield.
Why I prefer NAB shares
The numbers are useful, but they are not the only reason I would pick NAB.
The bigger reason is the shape of the business. Australian retail banking is a challenging market. Mortgage competition remains intense, deposit pricing matters, and households are still dealing with cost-of-living pressure and higher interest rates than they enjoyed a few years ago.
Westpac has a large retail banking franchise, and that gives it scale. But in this environment, I prefer NAB's stronger exposure to business banking.
Businesses need credit, transaction accounts, deposits, payments, working capital support, and advice through different parts of the economic cycle. That does not remove risk, especially if the economy slows, but it gives NAB a valuable point of difference.
I also think business banking relationships can be sticky. A company may rely on its bank for multiple services, which can make the relationship deeper than a simple home loan. That is why NAB looks better positioned to me.
What about Westpac shares?
Westpac is not a bad bank share.
It offers a solid dividend yield, a large customer base, and potential upside if sentiment toward the banking sector improves. Investors who already own Westpac may be happy to keep holding it for income.
But if I were choosing between the two today, I would rather buy NAB.
Its share price has weakened from its 52-week high of $49.45, and I think that pullback has created a more attractive entry point. The valuation is reasonable, the forecast income is attractive, and the business banking skew gives it a stronger case in the current environment.
Foolish Takeaway
I think NAB shares are the better buy.
Westpac still has appeal as a major bank with a solid dividend profile, but NAB gives me a more attractive mix of valuation, income, and business banking exposure.
In a tough retail banking market, that difference is important to me. For investors looking at the big banks today, I would buy NAB shares ahead of Westpac.
The post Better buy? NAB vs Westpac shares appeared first on The Motley Fool Australia.
Motley Fool contributor Grace Alvino 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.
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