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Big 4 banks set for worst year since GFC

Who would’ve guessed shares in Australia’s ‘Big Four’ banks would’ve fallen so hard in 2015?

Current Price 12 Month SP Return Year-to-date SP Return Six Month SP Return
CommBank 73.35 -10% -13% -24%
Westpac 29.92 -16% -11% -27%
NAB 30.07 -14% -12% -25%
ANZ 27.3 -22% -18% -29%
ASX200 5039 -12% -8% -18%

Source: Google Finance. SP = Share Price.

The above table shows the share price performance of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) over the past year, in 2015, and the past six months; compared to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

As can be seen in the table, each of the big banks have underperformed the broader market in 2015.

Worst start since the GFC

In fact, on average, shares of the big four banks are on track to endure their worst year since the GFC, when they each recorded a share price fall of more than 35%…

Big Banks 2008Source: Yahoo! Finance

Is it time to short the banks?

For years, many writers here at the Motley Fool have said the big banks aren’t cheap – it’s been no secret.

But before you call us all brilliant, it’s important to remember that each of the big banks have (slightly) outperformed the S&P/ASX200 over the past three years, so they’re still winning investments – even more so with dividends included!

However, I do think the days of double-digit profit growth from the big banks are done and dusted, and over the medium term we could see a meaningful rise in bad debts. If my prognostications are correct, it’ll impact the upside potential of their share prices.

But even though I am bearish on the banks at today’s prices, there is absolutely no way I would ‘short’ any of them. Shorting involves betting on a downward share price movement.

Indeed, the reality is that each of the big banks are excellent businesses and will likely return to a decent growth trajectory once the economy gives them the opportunity.

Therefore, although none of them are a buy in my opinion, I probably wouldn’t call them an outright sell for long-term focused investors either.

However, if you are overexposed to the sector, it may be a good idea to consider taking some profit (or losses!) off the table and transitioning into other – faster growing – dividend stocks…

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned.

Owen welcomes your feedback on Google+ (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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