Australia's big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC) have seen their shares rise around 1% today.
NAB is leading the charge as we head into the close of trading, up 1.22% at $32.46, with Westpac up 1.1% at $31.99, while ANZ and CBA were up 1% and 0.8% respectively.
Over the past month, shares in the big four have dropped between 7% and 9%, but today's rise may only be a temporary reprieve. The banks face an unprecedented number of headwinds, which could well see their shares drop further from here.
Earlier today, my colleague Ryan Newman listed four threats to Commbank, including the Australian economy, the US economy, a booming property market and sky high share valuations.
Those are just the start of the issue, with the banks facing the prospect of being forced to hold more capital – one of the potential outcomes of the current Financial Inquiry.
Then there are threats to the Freedom of Financial Advice (FOFA) reforms, which could hurt the banks' wealth management arms. The big four and AMP Limited (ASX: AMP) are estimated to control much of our wealth management and financial planning sector.
Another risk is that international investors, worried about further falls in the Australian dollar, are pulling money out of Australia's high-yielding stocks – and not just the banks, but solid dividend-paying companies like Woolworths Limited (ASX: WOW) and Telstra Corporation Ltd (ASX: TLS).
Then there's the potential for further rises in Australia's unemployment, which could lead to higher levels of bad debts, a situation the banks haven't had to face for many years. Higher provisions for bad debts directly affect bank profits, and could see profits and dividends fall.
We've been warning about the banks' expensive shares and rising risks for some time now. Those factors seem to be gathering pace. Look out below.
