Westpac Banking Corp (ASX: WBC) shares have fallen almost 24% in just 12 months.
Look away now if you own shares…
The above graph starts at a time when the Westpac share price was almost $40 (it reached an all-time higher of $39.75, last year) and was arguably ripe for a setback.
In early 2015, fears of a slowdown in China were finally beginning to emerge and investors were scrambling for the exits of richly-priced bank shares like Westpac, Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).
Then came changes to the amount which the four major banks must hold against mortgages, another decision by APRA to lift the banks' capital buffers (which led to Westpac raising $3.5 billion of new capital) and a slowing of property market growth.
So after all that it's easy to see why the Westpac share price has fallen so quickly.
The concern now, however, is whether or not the worst is yet to come. We've seen the ANZ share price continue to fall hard in recent months as a slowdown in the resources sector impacts credit quality. This is likely to affect all major banks.
Foolish takeaway
It'd be just educated speculation to suggest the banking sector may be at a turning point. Indeed, bank shares are cyclical (like their profits after them). Obviously – the sharemarket is now pricing in less growth for Westpac.
Therefore, it's now more important than ever to maintain a diversified portfolio. Start by asking yourself if you are overexposed to banks and property (they're practically one-and-the-same in Australia).
