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Why the big four banks are on the nose today

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) closed down 0.5% today, driven in part by falls in the big four banks.

Westpac Banking Corp (ASX: WBC) lost 3.9% or $1.37 to close at $33.47, after going ex-dividend. The banks declared a 92 cent full franked dividend for the second half of the 2014 financial year, which investors will receive in their bank accounts on 19 December 2014, just in time for Christmas.

But Westpac wasn’t alone in being sold off.

Australia and New Zealand Banking Group (ASX: ANZ) dropped 1.1% to $32.52, while National Australia Bank (ASX: NAB) fell 0.7% to $32.98. Commonwealth Bank of Australia (ASX: CBA) saw its shares down 0.2% to $82.56.

And it seems there may be several reasons for the bank sell off, despite news out today that investment property lending surged in September. Or maybe the banks were sold off because of that. Maybe investors are waking up to the fact that the big four banks, with their 80% plus share of Australia’s mortgage market, may be too heavily exposed to a potential fall in property prices.

The Australia Bureau of Statistics (ABS) noted that new lending for investment properties rose 3.7% in September, compared to August, but overall new home loans slumped 0.7%.

It adds further weight to calls from the market for the Reserve Bank of Australia to impose stronger lending criteria on the big four banks, at a time when the final report from the Financial System Inquiry is due to be released.

Many commentators expect the inquiry to recommend changes to the financial system that could see the big four banks required to hold billions in additional equity capital. There have also been concerns raised over their domination of Australia’s superannuation system and the financial planning industry.

It could be that several investors have jumped out of the banks, in time to pick up shares in the initial public offering by health insurer Medibank Private. The IPO offer period closes this Friday.

But maybe, just maybe, investors are realising how leveraged the banks are to our property market.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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