Rate pain? ANZ share price dips to 52-week low on Wednesday

Why is the ANZ share price tumbling again?

| More on:
A businesswoman holding a briefcase rests her head against the glass wall of a city building, she's not having a good day.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • ANZ's shares have slumped to a 52-week low on Wednesday
  • Investors have been selling bank shares after the RBA's surprisingly large rate hike
  • Rising rates are good for bank margins but the rapid increases could pose challenges

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is tumbling on Wednesday.

In afternoon trade, the banking giant's shares are down 2.5% to a 52-week low of $23.85.

Why is the ANZ share price tumbling?

Investors have been selling down the ANZ share price today amid broad weakness in the banking sector.

This has seen all the big four and challenger banks drop into the red today despite the market rebounding from yesterday's selloff.

The weakness in the banking sector has been caused by concerns over the Reserve Bank's greater than expected rate hike on Tuesday and its future plans.

But aren't rate hikes good news?

While increasing rates are seen as a positive for the banks and their net interest margins, it is the pace of the hikes that has investors concerned.

The market was previously expecting a gradual and measured tightening cycle from the central bank. However, it now looks likely to undertake an aggressive stance, which could create challenges for the banking sector.

Morgans believes the Reserve Bank could take the cash rate as higher as 2.6% by the end of the year if it follows the US Federal Reserve's lead. A sharp contrast to where it started 2022.

It commented:

[T]he RBA will likely move in 50bps increments consistent with upcoming Fed decisions. This will see the RBA increase the cash rate to 135 basis points in July, and on current market pricing take the cash rate to 260 basis points by year-end.

As for the impact on the big four banks, Morgans summarised:

Although a rising official cash rate will benefit bank Net Interest Margins (NIM). Higher interest rates will likely place downward pressure on asset prices and credit growth. Higher interest rates will increase the risk of asset quality deterioration. Rising risk-free rates will place upward pressure on the cost of equity. From a dividend yield perspective, we expect downward pressure on valuations as we expect dividend yields to become less attractive relative to rising risk-free rates.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Dividend Investing

Are CBA shares still a good buy today for passive income?

Looking to earn passive income from ASX dividend stocks? Here’s my take on CBA shares.

Read more »

Shocked office worker staring at computer screen with colleagues working in the background.
Bank Shares

The ASX bank share beating CBA in 2025

Many investors might not realise this smaller bank stock is leading the pack this year. 

Read more »

man thinking about whether to invest in bitcoin
Bank Shares

Here's what needs to happen for the CBA share price to try and reach $200

What could drive the CBA share price higher?

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

Why now could be an opportune time to sell CBA shares

A leading expert offers his verdict on the outlook for CBA shares.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Bank Shares

The Westpac share price is a buy – UBS

The broker is optimistic on Westpac shares.

Read more »

Bank building with the word bank on it.
Bank Shares

The biggest buyers and sellers of ASX 200 bank stocks revealed

Macquarie breaks down who’s been buying and who’s been selling the ASX 200 bank stocks.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Resources Shares

Should I switch my ASX 200 banking stocks for ASX 200 miners before earnings season?

The ASX 200 Index is dominated by Australia's bank and materials/mining sectors, which together account for around half of the…

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Bank Shares

Here's when Westpac says the RBA will now cut interest rates

The RBA surprised everyone by keeping rates on hold last week. So, when will the next cut happen?

Read more »