Last week was a horror week for shareholders in Australia's four major banks. The "Big Four" which all provided profit updates to the market saw significant share price falls, and this resulted in a horror week for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which recorded a drop of 3%.
These were the share price declines from largest to smallest:
- Westpac Banking Corp (ASX: WBC) down 7.3%
- Commonwealth Bank of Australia (ASX: CBA) down 6.9%
- Australia and New Zealand Banking Group (ASX: ANZ) down 5.3%
- National Australia Bank Ltd. (ASX: NAB) down 4.4%
There are plenty of theories as to the core reason behind the sell-off in banking stocks but needless to say; the wind appears to have been taken out of their sails.
Goodbye $100
As I noted here last month, Commonwealth Bank was just $8 short of crossing the $100 per share mark which would have heralded a stunning upswing from the darkest days on the Global Financial Crisis (GFC) in early 2009.
However, with Commonwealth Bank's share price having now retreated to close Friday's trading session at $82.64 that triple-digit figure now looks out of reach.
Hello $60
At the start of 2013 the share price of Commonwealth Bank was just over $60 a share. In the space of just two-and-a-half years the stock soared to within a whisker of $100. Arguably the run-up in share price was more so thanks to the momentum of the so-called "yield trade" which is a consequence of the record low interest rates rather than based upon a conservative assessment of long-term value.
Now, while I'm not predicting that the stock is set for a fall to $60 anytime soon, shareholders should remind themselves that for the majority of the past five years, the share price of Commonwealth Bank has traded below the $60 level, not above it.
