When it comes to investing in Australian banking giants, the Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp. (ASX: WBC) are two top contenders. With the financial year (FY) 2024 results in, investors are keen to see how these banks measure up against each other. Let's dive into the analysts' outlooks and key metrics to determine which bank might be the better investment.

FY 2024 Results: CBA vs. Westpac

Commonwealth Bank of Australia (CBA)

CBA's share price has been on an upward trajectory, currently trading at $135.30, a 19% increase since the beginning of the year. The bank's stronger-than-expected FY 2024 results have played a significant role in this rise.

CBA reported a cash nett profit after tax (NPAT) of $9.84 billion, a 2% decline from the previous year, and a statutory NPAT of $9.48 billion, a 6% drop. Despite these declines, the bank's operating income remained flat, while operating expenses rose by 3% to $12.2 billion due to inflation and increased technology spending.

One critical metric to watch is the nett interest margin (NIM), which measures the profitability of the bank's lending activities. CBA's NIM decreased by 8 basis points to 1.99% in FY 2024, primarily due to competition and deposit switching. However, there are signs that the NIM decline may be stabilising, with a slight improvement of 1 basis point in the second half of FY 2024.

Analysts have mixed feelings about CBA's current valuation. Morgans has a "reduce" rating with a price target of $97.38, and Morgan Stanley holds an "underweight" rating with a target of $103.00. Both targets are significantly lower than the current share price, indicating potential downside risks. Goldman Sachs is even more bearish, reiterating a "sell" rating with a price target of $94.80, suggesting a 30% downside over the next 12 months before dividends.

Westpac Banking Corp. (Westpac)

Westpac shares have also shown a solid performance, trading at $29.48, with a 2% increase on the day and a 5% rise over the past month. Positive investor sentiment in advance of the company's August 19 announcement of FY 2024 earnings is pushing the share price closer to its 52-week high of $29.94.

Analysts' opinions on Westpac are also varied. Goldman Sachs has set a bearish price target of $24.10, indicating a potential downside of around 18%. The broker forecasts earnings per share (EPS) of $1.92, a 6.5% decrease from FY 2023, and a nett interest income (NII) of $18.6 billion, with a NIM of 1.92%. These figures suggest a return on equity (ROE) of 9.3%.

Citi, JP Morgan, and UBS have also issued sell ratings, highlighting concerns over Westpac's earnings potential. These cautious stances imply that Westpac may face challenges in FY 2024, impacting its share price.

Key Metrics and Investment Considerations

Net Interest Margin (NIM)

For both CBA and Westpac, NIM is a crucial profitability measure. CBA's NIM at 1.99% and Westpac's at 1.92% indicate that both banks are generating similar profits from their lending activities. However, CBA's slight improvement in NIM during the second half of FY 2024 suggests a potential for stabilisation and future growth, which is a positive sign for investors.

Share Price Performance

CBA's share price has increased by approximately 30% over the past year, reflecting strong investor confidence. In contrast, Westpac's share price is nearing its 52-week high, showing a recent upward trend but with less overall growth compared to CBA.

Analyst Ratings and Price Targets

Analysts' ratings and price targets provide insight into market sentiment. While CBA has received a mix of "reduce," "underweight," and "sell" ratings with lower price targets, indicating potential downside risks, Westpac has also faced bearish ratings with concerns over its future earnings.

Dividend Yield

Both banks offer attractive dividend yields, which is an essential consideration for income-focused investors. However, the potential downside risks highlighted by analysts should be factored into the overall investment decision.

Market Position and Strategy

CBA has a strong market position, being the main financial institution for over a third of Australians. The bank's focus on direct customer relationships, rather than relying heavily on brokers, gives it a competitive edge and helps protect its NIM and profitability.

Westpac, on the other hand, faces mixed sentiment from analysts and may encounter challenges in maintaining its growth momentum. The upcoming FY 2024 earnings release will provide further clarity on the bank's performance and future outlook.

In the battle between CBA and Westpac, both banks have their strengths and weaknesses. CBA's strong market position, slight improvement in NIM, and positive share price performance make it an attractive option for investors seeking stability and growth. But it is important not to discount the possible negative risks that analysts have pointed out. 

Westpac, while showing recent share price gains, faces a more cautious outlook from analysts. The upcoming earnings release will be crucial in determining the bank's future trajectory.

Ultimately, investors should consider their risk tolerance, investment goals, and the latest analyst insights when choosing between these two banking giants. Both CBA and Westpac offer potential opportunities, but careful analysis and monitoring of key metrics will be essential in making an informed investment decision.