Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 639

CBA or global banks?

Earlier this year, as CBA’s market cap soared to nose-bleed heights, I wrote about a new wave of dividend darlings (global banks) emerging as CBA alternatives.

The key message was that despite CBA historically being a great investment for yield and returns, stretched valuations were flashing a signal for investors to reduce single stock risk and diversify into global banks.

CBA delivered a total return of +67.7% in the period through 2023 and 2024.

This was a comparable return to an investment in the MSCI World Banks Index (+68.5% in AUD). But just holding CBA came with obvious single-stock risk – risk that has now materialised.

Year-to-date (to Nov 17, 2025) CBA has returned +5.9%, including the recent draw down.

On the other hand, a domestic investor in the broad MSCI World Banks Index would have been up +32.3% (in AUD terms). In USD terms the index is up +39.2%.


Source: Bloomberg, YTD (17/11/2025)

Does the case for global banks still stack up?

As you can see in Figure 1, global banks have rallied hard as CBA’s share price has come under pressure.

But valuations still provide a compelling argument for going global in 2026.

Despite CBA’s pullback, it continues to trade at a P/E ratio of 25.7x, maintaining a significant premium over other major Australian banks (NAB 18.8x, Westpac 19.3x, ANZ 18.3x).

And in comparison, the MSCI World Banks Index is trading at 12.7x (and for this price you still get exposure to CBA thrown in, sitting at 3.4% of the World Bank Index at the end of October 2025).

A lower PE for the broad index indicates potential future upside, driven by major constituents of the index trading at around half CBAs valuation.

In the US, profitable well-run banks, including JPMorgan Chase & Co (14.9x), Wells Fargo (13.7x) and Bank of America (14.0x), trade at much lower levels. Even deeper discounts are on offer across the ocean on European exchanges. For example, Nordea Bank (10.6x) and BNP Paribas (7.2x).

As ASX bank reporting season drew to a close, my colleague Peter Gardner released a note on the Australian bank’s dividend outlook. Peter observed that top-line numbers didn’t thrill, with ANZ’s headline earnings down -14% (cash earnings broadly flat after adjustments) and both Westpac and NAB’s earnings experiencing little to no growth.

In contrast, several major U.S. banks have kicked off their third-quarter reporting season with a strong start.

JPMorgan posted a 16% rise in earnings, while Bank of America reported an 11% increase in revenue to more than US$28 billion.

Collectively, the six largest U.S. banks generated around US$142 billion in profits over the last calendar year – up roughly 20% from the previous year.

For investors, global banks present an appealing proposition: they trade on lower valuations that are underpinned by more diversified earnings streams across segments such as wealth management, trading, and investment banking.

But doesn’t CBA provide high income in volatile times?

Many clients I speak to rightly note that global yields have historically trailed those in Australia, anchored by the MSCI World Index’s modest 1.3% yield.

Yet, as with any market, pockets of opportunity remain for those who know where to look. The key question is how to access them.

I’m reminded of a client who once said, half-jokingly, that investing internationally felt like “travelling for yield” – you have to leave home to find it, but the trip can be worth it.

That observation rings true today. Global banking names are increasingly providing the kind of income and growth investors search for.


Source: FactSet, Plato Investment Management, 17/11/25

Figure 2 highlights several key metrics from a selection of global banks, revealing some noteworthy insights.

It is immediately apparent that certain global banks offer higher income levels (sufficient to meet a retiree’s income needs), whilst also delivering positive dividend growth.

In contrast to CBA’s earnings per share (EPS) growth, which has moderated slightly over the last 3 years, investors can still access banks with stronger earnings momentum at more attractive valuations. This is reflected in their lower price-to-earnings (P/E) ratios.

As Buffett famously noted, “Price is what you pay; value is what you get”. A reminder that disciplined investors can often find greater long-term value in quality companies trading at a discount.

What does this mean for yield-hungry Aussie investors?

The big banks, and Australian equities in general, remain an outstanding asset class for income-seeking investors. The mix of dividends and franking credits has a track record of generating materially higher yield than the so-called safe assets such as cash, term-deposits, and bonds.

However, diversification in income-portfolios, particularly for Australian retirees, is critical for both enhancing yield and mitigating risk.

Simply surviving on dividends from a small number of stocks in a concentrated local market puts retirees at higher risk of running down their savings too soon when sector or country-specific issues cause drawdowns and threaten income.

CBA is a case in point – despite solid fundamentals, the recent pullback was driven by the market view that CBA is priced for perfection and too expensive for the level of future growth, net interest margin compression, and cautious guidance provided.

Global markets provide access to dividend-paying equities in growth industries that are underrepresented on the ASX, such as technology and global consumer brands while introducing geographic and sector diversification.

 

Daniel Pennell is Portfolio Manager of the Plato Global Shares Income Fund. This article is for general information purposes only. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any opinions or forecasts reflect the judgment and assumptions of Plato and its representatives on the basis of information at the date of publication and may later change without notice. Any persons relying on this information should obtain professional advice relevant to their particular circumstances, needs and investment objectives.

Plato Investment Management Limited ABN 77 120 730 136 (‘Plato’) AFSL 504616.

 

  •   26 November 2025
  • 2
  •      
  •   
2 Comments
Tony
November 29, 2025

The CBA may have risen above AUD191 earlier this year but it is dropping now, and in the meantime the last yull year dividend was not all that much different than when the CBA share price was AUD94.00. A very high share price is always significant risk. The banks seems to have stepped away from inversting in profittable ventures. Also it wasn't that long ago the international players like (USD100 trillion loser) Blackrock were pressuring banks to curtail their investments into profitable ventures which did not suit the Climate lobby. These players also wanted represnettion on the boards of major banks. I wonder how that is worlign out for all concerned?

1
 

Leave a Comment:

RELATED ARTICLES

What the market may be missing in FY27

Is defensive the new offensive?

10 fearless forecasts for 2026

banner

Most viewed in recent weeks

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Why Australian shares are falling behind the world

Australia’s market boasts a long record of outperformance, but recent results tell a different story. Is the ASX’s lagging performance a temporary setback or evidence that structural forces will keep global markets ahead?

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Latest Updates

Economy

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Latest from Morningstar

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

Taxation

Completing the reform of CGT: tax real losses like real gains

Recent CGT reforms tax real gains by indexing capital gains to inflation. However, the reform fails to index losses, leading to higher tax on assets that do not keep pace with inflation, creating inefficiencies in the tax system.

Investment strategies

Blockbuster AI debt issuance coming to a bond market near you

With Australia likely to attract a growing share of AI-related issuance, investors should prepare for increasing influence from AI funding demands, evolving credit fundamentals and changing valuation dynamics.

Investment strategies

Active managers: Bringing a gun to the gunfight

When data arrived, basketball abandoned the mid-range shot, Formula 1 reinvented the pit stop and chess embraced humans working with machines. Active managers confronting today's markets may learn from the same path.

Retirement

What Australian super funds can learn from the UK

Most people want answers to three retirement questions: What have I got? Is it enough? What can I do with it? A leading UK pension innovator shares his lessons on helping members better understand and prepare for retirement.

Investment strategies

What the market may be missing in FY27

We asked ten fund managers the same question following FY26. While their investment styles differ dramatically, their answers revealed several surprising areas of agreement about where markets may be heading next.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.