Shares of Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) were trading down more than 3% around lunchtime today.

Source: Google Finance

Source: Google Finance

Westpac was leading the declines, down 4.7% at the time of writing, after Australia’s second-largest bank reported its half-year results to the market.

While the major features of Westpac’s results appeared positive, a few concerns appear to have reinvigorated those bearish on all banks. Headline figures of revenue and profit were up 5% and 3%, respectively, over the prior period, while the interim dividend was held flat at 94 cents per share.

The first concern for investors was a sharp rise in impairment charges, from $341 million last year to $667 million this year. The bank said the charges relate to a limited number of large corporate accounts.

The second concern was a rise in net interest income and lending, but a fall in profit margins. Fierce competition is evident; however, investors may be concerned that Westpac has chosen to grow market share at the expense of quality. This may be somewhat speculative, but investors would be wise to watch the change in lending and profitability closely. Obviously, such fierce competition would also be a negative for the other banks.

In part due to the increased shares on offer, Westpac’s earnings per share fell during the period. Further regulatory risk, however, is a key sticking point for market participants.

Finally, a cautious growth outlook, especially against the backdrop of a slowing property market, presents another uncertainty.

Foolish takeaway

The market appears to be voting with its wallet and selling down each of the major banks, including Commonwealth Bank of Australia (ASX: CBA). While the headline figures were somewhat positive, the market may be reading into the results and seeing tougher times ahead. Although the selloff could become overdone, investors may prefer to watch bank shares from the sideline. At least until the end of the week, once ANZ Banking Group and NAB have reported their results.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

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.