Australia's biggest banks have been on a tear recently, with each of the 'Big 4' – Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), and National Australia Bank Ltd. (ASX: NAB) – recently hitting their highest points for the past 12 months. Investment bank Macquarie Group Ltd (ASX: MQG) has also performed well, rising 10% to $88 per share.
The recent election of Donald Trump as President of the USA has been a partial catalyst for the banks' share price increases, with many in the market expecting that Trump's policies could lead to a quicker rise in interest rates. Lower interest rates have been both a boon and a burden to the banks in recent years in leading to an increase in lending activity whilst simultaneously squeezing Net Interest Margins (NIM), which are a key measure of bank profitability.
Although we can see from the above chart that the banks are still some way from 10-year highs which were reached in early 2015, there is some question about whether the banks can continue their recent strong run. Key concerns remain over profitability and the sustainability of the Australian housing boom, while on the other front, the recent unilateral decision from lenders to increase their rates speaks to their pricing power in the housing market.
