The share prices of Australia's biggest banks, namely Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) have fallen between 1.6% and 4.6% over the past month.
Unsurprisingly NAB – the bank which often trades on the lowest price to book and price to earnings multiples – has fallen the least, whilst Westpac – a bank I've touted as being very expensive – has fallen the hardest.
So could the latest price falls be your opportunity to buy in while they're cheap?
This proposition is especially tempting for retail investors, who have few alternatives to the low interest rates on offer in term deposits and savings accounts.
Sure, property investment is another option, but the capital outlay is large, active management will likely be needed and it would seem we're currently at the top of an investment cycle so be prepared, it might take a while to achieve your expected return.
However investing in bank stocks shouldn't be viewed as a one, two or three-year investment, either. It took five years for the share prices of Australia's big four banks to return to pre-GFC trading levels.
Buy, Hold, or Sell?
Before the most recent price falls in bank stocks, I opined tirelessly about the increased likelihood they could have passed their zenith, at least for the medium term. Despite ANZ, CBA and Westpac dropping 8%, 5.6% and 4%, respectively over the past three months, they're still not anywhere near a price I'd like to buy them.
I wouldn't consider buying any of them for more than 1.5 times book value – which is, in case you're wondering, a way below their current prices.
