Banking stocks had almost $14Â billion wiped from their value in a day in the wake of soft earnings results and speculation that a new tax would be unveiled in Tuesday night's federal budget.
After a week of sluggish bank results, a combination of a slightly disappointing quarterly result from Commonwealth Bank and reports that a new tax was likely to be put in place in the federal budget sparked the heaviest sell-off in the sector since Brexit
More BusinessDay Videos
- Video duration
- 01:02
ANZ Bank first half profit
ANZ Bank first half profit
ANZ Bank's profit increased 23 per cent in first half to $3.4 billion.
Up Next
ASX winners and losers - a snapshot
- Video duration
- 00:43
- Video duration
- 00:43
ASX winners and losers - a snapshot
ASX winners and losers - a snapshot
The stand out listings traded on the ASX captured at key moments through the day, as indicated by the time stamp in the video.
Up Next
Netmarble's trading debut
- Video duration
- 03:05
- Video duration
- 03:05
Netmarble's trading debut
Netmarble's trading debut
Netmarble Games will raise as much as $US2.3 billion after pricing its IPO at the top of its targeted range, amassing funds to get into new markets and titles.
Up Next
Qantas discovers that loyalty pays off
- Video duration
- 02:59
- Video duration
- 02:59
Qantas discovers that loyalty pays off
Qantas discovers that loyalty pays off
Qantas' frequent-flyer business, earmarked for sale at least twice, has delivered consistent growth since the airline's historic loss in 2012.
Up Next
So what's better than the bank tax?
- Video duration
- 02:26
- Video duration
- 02:26
So what's better than the bank tax?
So what's better than the bank tax?
Before branding it outrageous, tell us what immediate revenue raising would be better, fairer and possible? Michael Pascoe comments.
Up Next
Snap misses forecasts for new users and sales
- Video duration
- 05:00
- Video duration
- 05:00
Snap misses forecasts for new users and ...
Snap misses forecasts for new users and sales
Snap Inc.'s Snapchat app added fewer users than projected in the first quarter, a sign that the young company may have trouble expanding its audience as Facebook Inc. copies its most popular features.
Up Next
Myer sales fall in 3rd quarter
- Video duration
- 00:23
- Video duration
- 00:23
Myer sales fall in 3rd quarter
Myer sales fall in 3rd quarter
The department store is blaming a challenging retail environment and severe wet weather for a drop in sales in the three months to March 31.
Up Next
Young job seekers face tough challenges
- Video duration
- 01:08
- Video duration
- 01:08
Young job seekers face tough challenges
Young job seekers face tough challenges
17-year-old Bianca Barnard is battling to get a job at a time when youth unemployment is double the overall national unemployment rate.
ANZ Bank first half profit
ANZ Bank's profit increased 23 per cent in first half to $3.4 billion.
Commonwealth reported on Tuesday that its third-quarter unaudited cash profit rose 4.3 per cent to $2.4 billion.
That result followed interim results from Westpac Banking Corp, Australia and New Zealand Banking Group and National Australia Bank in the past week which saw the three banks post combined profits of $15.7 billion for the half.
On Tuesday all the banks were sold heavily on Tuesday. CBA was down 3.85Â per cent to $82.02, Westpac down 3.52 per cent to $32.88, ANZ down 2.64Â per cent to $29.16Â and NAB down 2.05Â per cent to $32.42.
Regional banks were also hit with Bendigo and Adelaide Bank (2.56) and Bank of Queensland (1.61 per cent) both dropping.
The falls wiped almost $14 billion from the market capitalisation of the big four banks on Tuesday.
The losses mean that ANZ is down 11 per cent since May 1 while the other big banks are down around 5.5 per cent since then. The loss in collective market capitalisation stretching back to May 1 is $30 billion.
"CBA had a bad result in the morning and shares were pretty expensive to begin with," Regal Funds Management analyst Omkar Joshi said.
Reports that a new "tobin tax"Â style levy on transactions could be part of the federal budget deepened the gloom in the sector.
"However (the levy) is described it will represent an additional tax or fee and the market is likely to be nervous about this prospect until they get details of what might be involved and what capacity of banks might have to pass this cost on to customers," said CMC chief market analyst Ric Spooner.
In a note titled "Nowhere to run", UBS analyst Johnathan Mott said Westpac's result typified the sector with revenue and costs both flat, margins under presser and asset quality solid.
But Mr Mott said a slowing housing market this year would likely take its toll on Westpac and its peers.
"In our view the impact on housing 'animal spirits' will be a key driver of the banks and the broader economy," he said.
"We expect the revenue outlook to remain challenging over coming years as credit growth slows."
Deutsche Bank's Andrew Triggs said Westpac, NAB and ANZ all had revenue challenges which had been smoothed by a good performance from their trading activity.
"Revenue weakness is consistent with other major banks and is likely to see CBA come back to the pack in operational performance, and ultimately share price, in our view," Citi analyst Craig Williams said in a note to clients.
Macquarie analysts tipped margins to come under pressure too as banks that tried to pass on interest rate rises ran into the capacity of indebted households to pay.
PwC Australia's banking & capital markets leader Colin Heath picked up this theme too saying the results illustrated just how reliant the big banks are on home lending.
"When you combine an uncertain economic outlook with regulatory and political scrutiny in this area, there's no guarantee that home lending will be the growth engine in the future," he said.
KMPG Australia head of banking Ian Pollari said the banks face a complex operating environment and would need to keep a focus on costs and productivity to deliver growth in the short term.
In its update CBA said its home lending rose by 7.8 per cent over the 12 months ended March 31, compared with a 7 per cent average for all Australian banks.
The growth outlook for Australian banks, which are highly reliant on mortgage loans, has dimmed after the country's prudential regulator announced on March 31 new limits on some types of lending.
CBA said lending to property investors had reduced as a proportion of total lending during the quarter, with new interest-only lending being closely managed in line with regulatory guidance.
Bad debts rose to $6.7 billion during the third quarter, compared with $6.3 billion a year ago.
Impairment expenses were $202 million, halved from the $427 million incurred in the previous year.
CBA's update followed rivals Westpac, National Australia Bank, and ANZ reporting a rise in half-year cash profit over the past week.
with Reuters
14 comments
New User? Sign up