The first quarter of FY23 was a green period for ASX 200 bank shares overall.
They may have had a terrible month in September, but for the three months of Q1 FY23 they all trended up (or remained steady in the case of Commonwealth Bank of Australia (ASX: CBA)).
The Westpac Banking Corp (ASX: WBC) share price rose by 6.3% over the three months to 30 September.
National Australia Bank Ltd (ASX: NAB) shares went up 4.7%. The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price went up 4.4%. CBA went nowhere — 0% movement by the end of the period.
By comparison, the S&P/ASX 200 Index (ASX: XJO) lost 1% over the period.
Does this mean ASX 200 bank shares are safe?
The word 'safe' is very subjective in share market investing. However, if you asked most Australians to name a few safe and reliable blue-chip shares, odds are they'll mention at least one of the big four banks.
ASX 200 bank shares have a reputation for being long-established and profitable companies. They are generally considered to be great ASX dividend shares and many retiree investors will attest to that.
So, relatively speaking, one might consider them safe stocks.
As has been said by many commentators before, the big four Aussie banks are likely "too big to fail".
ASX bank dividends are coming up
If you define safety as regular and reliable dividends, well, that's what the ASX 200 bank shares are known for. So, if you parked your money in banks in Q1, you can look forward to some dividend income soon.
Three banks will announce dividends soon — ANZ on 27 October, Westpac on 7 November, and NAB on 9 November.
As we've previously reported, Citi expects the final NAB dividend to be 77 cents. This follows an interim dividend of 73 cents. All up, $1.50 per share for the full FY22. Based on today's NAB share price of $30.14, this equates to a fully franked annual dividend yield of 7.1%.
Citi tips ANZ to declare a 72-cent final dividend, bringing the full dividend for FY22 to $1.44 per share. Based on the current ANZ share price of $24.29, this will mean a fully franked 8.5% annual dividend yield.
Goldman is forecasting a 62-cent final dividend from Westpac, bringing its full-year FY22 dividend to $1.23. Based on the current Westpac share price of $21.88, this will mean a fully franked yield of 8%.
What do the experts think of ASX 200 bank shares?
As reported on Livewire, Morgans, Jarden, and JP Morgan all rate NAB as their preferred banking stock.
Goldman Sachs analysts Andrew Lyons and John Li say Westpac is their pick for four main reasons.
Firstly, the company's performance is strongly leveraged to rising interest rates. They also note superior cost management, continuing business investment, and "supportive share price valuations".
Brad Potter, head of Australian equities at Tyndall Asset Management, expects the banks' net interest margins (NIMs) to "continue to increase strongly over the next six to 12 months", which will lead to "decent earnings growth".
The wholesale Tyndall Australian share fund holds all four ASX 200 bank shares. It's overweight in Westpac and ANZ shares and underweight in CBA shares.
Potter says: "CBA arguably deserves to trade at a premium to the other three banks, but the premium it's trading on is astronomical."
What will happen to ASX 200 bank shares in a recession?
There's been lots of speculation about a potential recession in Australia or the United States soon.
Potter says:
In a recession, I don't think the banks will be impacted particularly badly, particularly given their
very strong balance sheets, capital liquidity and provisioning levels.But from a sentiment perspective, banks get sold off during a recession. And that's why,
despite the fact we'll get decent earnings growth coming through in the next six to 12 months,
their share prices are probably not reacting very well.
