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S&P/ASX 200 down as banks crumble: What you need to know

market crash chart

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has crashed back below the 5200 point mark, following a weak lead set by international markets overnight. The local bourse fell as much as 1.4%, wiping most of the gains achieved over the last two days.

Indeed, National Australia Bank Ltd. (ASX: NAB) is one of the primary reasons behind today’s sharp fall. The country’s third biggest bank by market capitalisation fell 4.6% to $28.55 after going ex-dividend, although it appears investors may also be becoming wary of the tighter net interest margins, or NIMs, being experienced across the major banks.

The NIM is used to measure a bank’s level of profitability on the loans that it writes. All four banks have experienced tighter NIMs as a result of competition, with Commonwealth Bank of Australia (ASX: CBA) reporting a “slightly lower” group NIM this morning. The bank fell 1.6% while Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) also fell 0.8% and 1.5%, respectively.

Elsewhere, the miners were also acting as a drag on the market’s overall performance. BHP Billiton Limited (ASX: BHP) retreated 1.4% while Rio Tinto Limited (ASX: RIO) dropped 1.0%, with the gold miners falling even heavier. Newcrest Mining Limited (ASX: NCM) was down 3.4% while EVOLUTION FPO (ASX: EVN) lost 3.2% as gold prices continued to decline overnight.

It’s also possible that comments from the Reserve Bank of Australia’s governor, Glenn Stevens, are weighing on the market’s performance. Stevens said that any change to interest rates in the near-term would almost certainly be further easing, not tightening, although he expressed confidence that such a move wouldn’t be necessary.

That could be hurting the market’s appetite for dividend stocks for now, although it’s clear that interest rates will need to remain very low for the foreseeable future.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

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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