The National Australia Bank Ltd (ASX: NAB) is this afternoon sitting at the new 52-week high of $29.51. NAB shares are now up an eye-watering 25% for the year (not including the bank's substantial dividend payments).
But NAB isn't the only ASX bank breaking new highs. Westpac Banking Corp (ASX: WBC) also hit a new 52-week high of $29.97 just a fortnight ago and isn't looking too far off that mark today either. The other 'Big Four' banks – Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ) have also made their new 52-week highs in the last two months.
Why are ASX banks looking so strong?
Well, in my opinion, it's all about sentiment. The Royal Commission is now firmly in the rear-view mirror, refundable franking credits are here to stay, as is the ability of property investors to negatively gear their assets.
Combine these factors with a property market that seems to have found a bottom recently, and you have the perfect mix of positive news for our ASX banking sector. All of the banks make a substantial chunk of their profits from mortgages and property loans, so any sign of improving sentiment in the housing market is catnip for bank shareholders.
It even feels like the banks' glory days might be here again.
When exactly were the 'glory days'?
I'm referring to 2015 in this case – the height of the property boom. This was a time when Westpac was commanding a near-$40 price tag, as was NAB. Commonwealth Bank shares were nearly at triple digits and ANZ was closing in on $37 a share. To sum it up, just four years ago our ASX banks were at all-time highs and worth roughly 25% more than they are today.
Are we heading back to those levels?
Unfortunately, I don't think we are. Although property prices seem to have turned around, I don't believe we are about to see another massive rally like we have seen over the past decade. Interest rates are heading lower as well, which will continue to squeeze banks' profit margins. But I might be wrong, and we could be in a fresh new wave of mortgages and loans pushing up the banks' profits (and share prices). It's an interesting time to be sure!
