Trying to work out what any share might be worth in five years' time is a near-impossible task. And that's no less so with ASX 200 bank stocks.
To illustrate, who would have thought back in early 2019 that Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) shares would be up 54.31% and 23.46% respectively by early 2024?
Probably the same number of people who thought Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ) shares were destined to lose 11.78% and 0.46% respectively. That is to say, hardly anyone.
So it's an equally hard task to determine what these same big four banks might be worth in early 2029. I for one am not putting money on anything (although I do have money in one ASX 200 bank stock).
However, that doesn't mean we can't look at what some ASX experts are predicting will happen to the big four banks over the coming years.
Image source: Getty Images
ASX expert rates bank shares
One analyst who is bullish is Morgan Stanley analyst Richard Wiles. Speaking to The Australian, Wiles has recently come out and argued that forecasts of future interest rate cuts have given the banks' stock prices a collective boost, which could last for years:
Since the start of the latest RBA tightening cycle, the average major bank P/E multiple de-rated by an average of about 3.5 PE points – from about 15.7x in April 2022 to about 12.2 times in March 2023.
But the average multiple has subsequently rebounded by more than 3 times and the banks now trade at about 15.3 times, which is above both the pre-COVID 10-yr average of about 12.2 times and post-COVID three-year average of about 14.4 times.
Wiles concluded by making this prediction:
We think the recent re-rating largely reflects the prospect of multiple rate cuts in 2024 and a more optimistic outlook for the Australian economy and banks' earnings over the next two years.
But Wiles isn't the only expert who sees a prosperous future for ASX bank stocks.
According to a recent article from Reuters, a report from the Boston Consulting Group has found that global bank stocks "could boost their valuations by a combined $7 trillion in the next five years".
However, this is conditional on banks taking collective action to "pursue growth and improved price-to-book ratios despite obstacles".
Those obstacles, the report found, revolve around banks' profitability levels. The report concluded that "The largest driver of pessimism about the banking sector has been the significant drop in profitability".
Even so, it's still a positive development for bank stocks, including our own ASX big four.
It's devilishly difficult to even ballpark where our ASX bank stocks will be by 2029. But these experts seem to think that things are looking up.
