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

Why Europe is back on the global investor map

On the virtue of owning wonderful businesses like CBA

Can Aussie banks rediscover their glory days?

banner

Most viewed in recent weeks

Australia's retirement system works brilliantly for some - but not all

The superannuation system has succeeded brilliantly at what it was designed to do: accumulate wealth during working lives. The next challenge is meeting members’ diverse needs in retirement. 

Australian stocks will crush housing over the next decade, 2025 edition

Two years ago, I wrote an article suggesting that the odds favoured ASX shares easily outperforming residential property over the next decade. Here’s an update on where things stand today.

The 3 biggest residential property myths

I am a professional real estate investor who hears a lot of opinions rather than facts from so-called experts on the topic of property. Here are the largest myths when it comes to Australia’s biggest asset class.

Get set for a bumpy 2026

At this time last year, I forecast that 2025 would likely be a positive year given strong economic prospects and disinflation. The outlook for this year is less clear cut and here is what investors should do.

AFIC on the speculative ASX boom, opportunities, and LIC discounts

In an interview with Firstlinks, CEO Mark Freeman discusses how speculative ASX stocks have crushed blue chips this year, companies he likes now, and why he’s confident AFIC’s NTA discount will close.

Where to hide in the ‘everything bubble’

It might not be quite an ‘everything bubble’ but there’s froth in many assets, not just US stocks, right now. It might be time to stress test your portfolio and consider assets that could offer you shelter if trouble is coming.

Latest Updates

Economy

Get set for a bumpy 2026

At this time last year, I forecast that 2025 would likely be a positive year given strong economic prospects and disinflation. The outlook for this year is less clear cut and here is what investors should do.

Investment strategies

History says US market outperformance versus Australia will turn

Much has been made of how US markets, especially the NASDAQ, have significantly outperformed the ASX over the past two decades. History suggests the pendulum will swing back once again in Australia's favour.

Investment strategies

Announcing the X-Factor for 2025

What is the X-Factor - the largely unexpected influence that wasn’t thought about when the year began but came from left field to have powerful effects on investment returns - for 2025? It's time to select the winner.

Economy

The illusion of progress

What is progress? Is it GDP growth? Increasing wealth? New and improving technology? This argues that our measure of progress has become warped, and we're heading backwards rather than forwards.

Strategy

Our favourite summer reads

Summer is a great time to catch up on a good book. Here is a list of books on leadership, investing, and well-being for those looking to learn, reflect, and gain inspiration over the holiday season.

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.