Shares of major Australian banks paused on Monday after a significant sell-off over the past eight sessions erased more than A$63 billion ($40 billion) from their market value.
The “Big Four” banks experienced unprecedented growth last year due to strong inflows from superannuation funds and retail investors, which pushed their shares to multi-year highs and resulted in high trading multiples compared to the ASX200 benchmark index (.AXJO).
However, last week’s interest rate cut—the first since November 2020—along with modest earnings growth, an increase in bad debts, and rising arrears among the major banks led to a sell-off as investors moved away from these richly valued stocks.
As of 0030 GMT on Monday, financials (.AXFJ) rose by 0.8%, but they were still down over 7% since February 12, in contrast to a 3% drop in the ASX200 index.
Commonwealth Bank of Australia (CBA.AX), the top lender, lost as much as 10% over the past eight sessions, which translated to a loss of about A$25 billion in market value. On the day, its shares remained flat.
The bank reported a positive first-half profit and margin on February 12.
National Australia Bank (NAB.AX), the leading business lender in the country, broke a six-day losing streak on Monday but had still lost nearly 14% in the last eight sessions, equating to about A$18 billion in value.
Last week, NAB indicated strain on borrowing in its first-quarter profits and warned of increasing numbers of borrowers falling behind on payments.
Westpac (WBC.AX) and ANZ Group (ANZ.AX) also reported margin contraction and a rise in impaired assets last week, resulting in a combined loss of A$19 billion in value for both banks.
On Monday, NAB and ANZ each gained over 1%, while Westpac increased by 0.6%.
Macquarie stated, “With bank earnings upgrades potentially reaching their end, even ahead of the impact of lower rates… the long-awaited de-rating of the sector may be here.” The firm added, “We see further risk to share prices as valuations remain high.”
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