Since the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) hit a recent high of 5447 points on 28 October the market has fallen 4.5%. Given the solid run up from a low of 4656 points in late June, the recent pull back is relatively minor, but as usual it has the potential to create opportunities amongst individual stocks.
It is particularly interesting to compare the performance of the four major bank stocks since the 28 October high. By the end of trading on 11 December the Commonwealth Bank (ASX: CBA) had retreated just 1.8%, therefore outperforming the market. While the ANZ (ASX: ANZ) was down 5.8%, resulting in a slight underperformance. In comparison the National Australia Bank (ASX: NAB) and Westpac (ASX: WBC) had fallen 8% and 9.5% respectively, representing significant underperformance.
With little in the way of news flow to explain the hefty falls in NAB and Westpac's share prices, a review of the current price-to-earnings multiples (PE) and yields of each of the banks would seem in order to determine if a buying opportunity has appeared.
According to median broker consensus estimates provided by Morningstar:
- Commonwealth Bank is trading on a forecast PE of 14.7 and forecast dividend yield of 5.1%.
- ANZ is trading on a forecast PE of 12.4 and forecast dividend yield of 5.5%.
- NAB is trading on a forecast PE of 12.4 and forecast dividend yield of 6%.
- Westpac is trading on a forecast PE of 13.2 and forecast dividend yield of 5.9%.
Foolish takeaway
Based on analyst consensus data it would appear that the recent decline in the share prices of NAB and Westpac has indeed made both banks relatively more attractive. Based on yield they are both offering investors around 6%, which is a full 1% above the Commonwealth Bank's forecast dividend yield. While based on PE multiples, the fall in NAB's stock has put it on par with the ANZ in terms of pricing.
