Westpac Banking Corp (ASX: WBC) was amongst the market's worst performing stocks today and acted as a key drag on the Australian sharemarket as a whole.
The stock fell 2% compared to the S&P/ASX 200's (Index: ^AXJO) (ASX: XJO) 1.5% decline. Westpac's fall saw more than $2 billion wiped from its market value. Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) delivered similar performances, declining 1.3%, 0.9% and 1.7% respectively.
Each of the banks have come under considerable selling pressure in recent months as the market has finally come to recognise the headwinds facing the sector. In May, Westpac delivered a disappointing half-year earnings report while it was also forced to issue $2 billion of new shares to increase its capital buffer, ultimately diluting shareholder ownership.
Prior to that it also admitted that dividend payout ratios across the sector had likely peaked, citing the need to have "sufficient capital to back your activity as you look forward."
The bank extended its declines today as a result of the Reserve Bank of Australia's latest decision on interest rates. At 2:30pm (Sydney time), the central bank announced that the nation's official cash rate would remain unchanged for at least one more month which saw the market's appetite for expensive high-yield dividend stocks decline even further.
Although the bank's shares have lost more than 19% since peaking in April, the stock is by no means in bargain territory. While there is certainly scope for a recovery in the near-term, it stands little chance of delivering market-beating returns in the long-run, making it a stock for 'Foolish' investors to avoid.
