Attention big bank shareholders, look away now…
Source: Google Finance
…because shortly before the market's close today, the big banks were leading the market lower.
- Commonwealth Bank of Australia (ASX: CBA) – down 1.93%
- Australia and New Zealand Banking Group (ASX: ANZ) – down 2.52%
- Westpac Banking Corp (ASX: WBC) – down 2.79%
- National Australia Bank Ltd (ASX: NAB) – down 2.97%
While shares in each of the major banks are slightly higher since the beginning of the week, following a rally in prices yesterday, it's been a tough year for big bank stocks.
Surprisingly, Westpac, which boasts the largest exposure to housing investors, has fallen the least in 2015 (down 6.75%). NAB is down 9% in that time while Commonwealth Bank has fallen 12%.
Finally, despite its touted Asian growth potential, ANZ shares have been hardest hit in 2015 – falling 13.31%.
Are the banks facing headwinds or is it time to buy?
Although big bank shares look cheap using conventional valuation metrics (such as P/E ratios and dividend yield), there are reasons to be wary of investing in banks at this time.
Indeed, if the economy is heading for a recession, as many commentators suggest, the banks will struggle to grow their loan books and bad debts would likely rise significantly – which would undoubtedly weigh on their profits and share prices.
Therefore, I'm choosing to watch the Big Four from the sidelines, at least for the foreseeable future.
