Have ASX bank shares become too big for their boots? Macquarie weighs in

Most ASX bank shares are underperforming in 2023 and Macquarie foresees more downside ahead.

A smug executive woman wearing glasses and red lipstick blows a kiss to herself as she takes a selfie.

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

sdf

Key points

  • Most ASX 200 bank shares are underperforming the broader market in 2023, and top broker Macquarie sees more downside risk ahead
  • Macquarie shares have performed best with a 10.9% gain in the year to date 
  • Bank of Queensland shares have fallen the most with a 12.5% decline 

Most ASX bank shares are underperforming the broader market in 2023, and top broker Macquarie sees more downside risk ahead.

Let's check out the state of play for the biggest ASX 200 bank stocks over 2023 so far.

Bank shares relatively weak in 2023

Over the year to date, the benchmark S&P/ASX 200 Index (ASX: XJO) has risen by 5.3%.

Let's compare this to the performance of the bank stocks.

The share price risers (as at the close of trade on Friday):

  • The Macquarie Group Ltd (ASX: MQG) share price has risen 10.9%
  • The ANZ Group Holdings Ltd (ASX: ANZ) share price has ascended 9.6%
  • The Commonwealth Bank of Australia (ASX: CBA) share price has risen 3.1%.

The share price fallers:

  • The Bank of Queensland Ltd (ASX: BOQ) stock price has dropped 12.3%
  • The National Australia Bank Ltd (ASX: NAB) share price has tumbled 5.06%
  • The Bendigo and Adelaide Bank Ltd (ASX: BEN) stock price has declined 4.4%
  • The Westpac Banking Corp (ASX: WBC) share price has fallen 3.2%.

Where to from here? Down, down, down…

According to reporting in The Australian, Macquarie says:

We see limited scope for banks to re-rate from current levels and believe the risk to multiples in the near term remains skewed to the downside, while investors remain concerned with potential credit quality issues stemming from economic slowdown.

In the medium term, while banks appear cheap on an absolute basis and compared to their recent history relative to the broader market, we expect discounted valuations to persist until there is more clarity on the economic outlook.

Why Macquarie is wary of bank stocks

The threat of recession in the United States, Australia, and other nations still looms.

Macquarie says in the lead-up to past recessions, relative multiples for bank shares have contracted by about 10% to 30%. At this stage, the contraction among the banks is sitting at 3%.

Macquarie also expects a 1% to 5% downgrade of consensus earnings estimates for FY24.

Macquarie is neutral on ASX bank shares for the moment.

Its order of preference among the big four is NAB shares, then Westpac, ANZ, and CBA shares.

Among the regionals, Macquarie analysts prefer Bendigo and Adelaide Bank shares over Bank of Queensland shares.

Westpac is currently forecast to pay the greatest dividend yield of the banks in FY24, according to our survey of recent broker predictions.

If you're curious as to why Macquarie shares are outperforming, it may be due to a key differentiator in its business compared to the other banks.

Motley Fool contributor Bronwyn Allen has positions in Anz Group, Commonwealth Bank Of Australia, Macquarie Group, and Westpac Banking Corporation. 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 positions in and has recommended Bendigo And Adelaide Bank and Macquarie Group. 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

Woman calculating dividends on calculator and working on a laptop.
Bank Shares

When does Macquarie expect Westpac to cut its dividend?

Here's the latest forecast for this banking giant's dividend.

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

When will CBA shares stop rising? CSL might give us a clue

CSL's history might tell us what's in store for CBA.

Read more »

Woman and man calculating a dividend yield.
Bank Shares

Is the ANZ share price a buy right now?

Should investors be attracted to the major bank?

Read more »

stockmarket graphic in background with man looking at stockmarket on phone
Bank Shares

Which of the big four bank shares have doubled in the last 5 years?

These two blue-chip bank shares have risen above the rest in recent times.

Read more »

Couple looking at their phone surprised, symbolising a bargain buy.
Bank Shares

Wondering if CBA shares are overvalued? This shocking metric proves it

You won't see CBA in the same light after seeing this.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Bank Shares

Macquarie share price higher amid DRP dividend news

Macquarie has announced the share price of stock to be allocated through its dividend reinvestment plan.

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

CBA shares are now worth a total of more than $300 billion. Here's why that's a problem

CBA’s ever growing stock market dominance is raising red flags. But why?

Read more »

An excited man stretches his arms out above his head as he reaches a mountain peak.
Record Highs

Breaking: CBA shares hit a new record of $180

CBA shares can't possibly keep rising can they?

Read more »