Set and forget investors holding National Australia Bank Ltd. (ASX:NAB) might be focussed on their dividends, but they’ve made a hefty capital loss in the last 12 months.

You can see for yourself that NAB shares are down 33% in the last 12 months:

Screen Shot 2016-04-06 at 1.22.56 pm

Source: Google Finance

Of course, many bank shareholders will be wondering why their beloved shares are down so much.

Well, there are a number of reasons.

First, NAB demerged with Clydesdale and Yorkshire Banking Group (ASX:CYB), causing the share price to drop when the UK bank was separated. However, the ASX-traded CYBG CDIs are worth about $4 each, and since NAB shareholders received 1 CYBG CDI for every 4 shares held, the value of the demerger is only about $1 per share. So that doesn’t go far to explaining the 33% decline.

The more pressing issue for NAB is that Australian banks are facing increasing costs when borrowing money overseas, as MacrobusinessSydney Morning Herald and even the Australian Financial Review have noted. This is problematic because NAB needs that money to fund the mortgages it extends to Australians, so that people can afford a home in one of the most expensive house markets in the world. As NAB’s borrowing costs increase, it must either increase rates on its customers or reduce its profits, assuming that the RBA holds interest rates steady.

Now, I have been rather bearish on the big banks for a few years now. While NAB is down about 20% since I wrote this bearish article, shareholders have received decent dividends along the way. However, my main point back then, as now, is that big banks, and, in particular, their mortgage books, are accounting for a very large chunk of the market capitalisation of the ASX.

Unless the house price boom can go on forever, this situation is unlikely to be sustainable. Indeed, another reason bank share prices are falling could be that investors can see that the property market is cooling. Additional regulatory requirements on banks are also being felt.

Finally, the upcoming wave of debt defaults from probably-doomed resource companies like Arrium Ltd (ASX:ARI) are also leaving investors feeling more skittish about banks. As a result, we have declining bank share prices with little to suggest this trend will reverse in the near future.

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Motley Fool contributor Claude Walker has no position in any stocks mentioned. You can follow him on Twitter @claudedwalker. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.