The Westpac Banking Corp (ASX: WBC) share price has fallen 13% in three months.
Westpac share price versus ASX200
As can be seen above, the Westpac share price has substantially underperformed the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), since March.
It's been a tough few months for Westpac and banks in general.
In that time, Westpac reported a jump in half-year revenue and a 3% increase in profit. However, the bank's outlook statement was not very 'rosy'.
Perhaps investors were not impressed. I wasn't.
Another issue for banks is rising US interest rates. The US Federal Reserve has continued to increase its interest rates as its economy shows growth. This makes overseas debt more expensive for our banks.
Interest-only and investor loans have also been thrust into the spotlight, following regulator and media scrutiny. Around 50% of Westpac's loans are interest-only.
And despite their margins already being squeezed. Westpac was slugged with a government bank levy in May.
The elephant in the room: house prices have also shown weakness this year. Falling house prices are bad news for Westpac, for obvious reasons.
Following this, Standard & Poor's and Moody's – two international credit ratings agencies — downgraded their view of Westpac and its peers. That might also hurt its profits margins.
Foolish Takeaway
The banks have enjoyed many years of house price growth, easy lending and weak competition. However, as can be seen above, conditions are getting tougher.
Westpac shares are not a buy in my book, and if I held more than 20% of my portfolio in Australian banks (overall) I would be concerned. Any more than that is too much, in my opinion.
