MENU

Could your bank shares keep falling?

Shares in Australia and New Zealand Banking Group (ASX: ANZ) continued to sell off on Wednesday despite the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) spending most of the session in positive territory.

With ANZ Bank down around 0.9% by late afternoon trade, the shares have now lost close to 12% in the past five trading days.

ANZ Bank has been the worst performer of the four major banks over this time frame and in fact it is now the worst performer amongst its peers this calendar year; a title previously held by National Australia Bank Ltd (ASX: NAB).

What’s going on?

The catalyst for the sell-off in bank stocks has been mounting fears regarding bad debt charges which Australian banks will be forced to take.

Last week ANZ Bank raised its forecast for loan losses by $100 million with management citing clients in the resource sector as the cause.

ANZ Bank’s actions have forced investors to face up to the fact that the cycle looks to be turning. Impairment charges would now appear to be in an uptrend having come through a cyclical low.

Australian banks remain amongst the most profitable in the world, so rising charges can quite easily be absorbed.

Despite this, a tightening market is expected to constrain earnings growth. For this reason, although trading on arguably attractive multiples, it may be too soon to buy the banks.

With bank, commodity and energy shares all on the nose with investors, what would YOU do if the market crashed tomorrow?

With the ASX flirting with 5,000, some experts are predicting a market crash. Discover our Foolish experts' advice on what YOU should do in the event of a crisis -- simply click here for your FREE copy of our newly updated report, "What to Do When the Sharemarket Crashes". Click here, it's FREE!.

Motley Fool contributor Tim McArthur 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. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.