Australia’s Major Banks Pause After $40 Billion Loss

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Shares of Australia's top banks took a pause on Monday after a sharp sell-off over the past eight trading sessions wiped out more than A$63 billion ($40 billion) from their market value.

The "Big Four" banks had seen significant growth last year, driven by strong flows from superannuation funds and retail investors, which pushed their shares to multi-year highs and at high multiples compared to the ASX200 index. However, the recent interest rate cut — the first since November 2020 — along with modest earnings growth, rising bad debts, and increasing arrears led to a sell-off as investors moved away from these richly valued stocks.

As of 0030 GMT on Monday, financial stocks had risen by 0.8%, but were still down more than 7% since February 12, compared to a 3% drop in the ASX200 index.

The Commonwealth Bank of Australia, the country's largest lender, lost up to 10% over the past eight sessions, wiping about A$25 billion from its market value, though it was flat on Monday. The bank had reported strong first-half profits and margins on February 12.

National Australia Bank, the leading business lender, broke a six-day losing streak on Monday but had lost nearly 14% in the past eight sessions, or around A$18 billion in value. NAB recently warned of pressure on its first-quarter profits due to borrowing strains and expected more borrowers to fall behind on payments.

Westpac and ANZ also reported margin contraction and a rise in impaired assets last week. Together, the two banks have lost about A$19 billion in value. On Monday, NAB and ANZ were up over 1%, while Westpac rose 0.6%.

Macquarie analysts suggested that bank earnings upgrades might have reached their peak, with the long-anticipated de-rating of the sector potentially underway. They warned that further downside risk remains as valuations are still high.

Paraphrasing text from "Reuters" all rights reserved by the original author