Almost every working or retired Australian will have some sort of exposure to big bank shares via their outsourced superannuation investments or as part of an as SMSF.
For example almost every industry super fund or for-profit super funds will have investments in big bank shares simply because they make up such a large part of the market.
As such it's important to consider which way next for bank shares? Well, even Australia's best banking analysts are uncertain on that question. For example Goldman Sachs currently has a fence sitting "neutral rating" on three of the four big bank shares including Australia & New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: NAB).
However, according to a June 4 research note out of Goldman's it does have a "buy" rating and $30.24 share price target on National Australia Bank Ltd (ASX: NAB) shares.
Today the shares change hands for $26.75 to suggest some 13% upside plus the benefits of fully franked dividends over the next 12 months if Goldman's analysis is on the money.
On a trailing 12 month basis NAB has paid out $1.98 per share in dividends to place it on a yield of 7.4%, however, an unusually high yield is often a sign of a coming dividend cut.
According to consensus estimates NAB could pay around $1.66 in dividends over the next 12 months to put it on a forward yield of 6.2%.
Investors need to be careful though because as Goldman's points out itself falling benchmark lending rates are likely to be a headwind for NAB's net interest margin and profitability.
The analysts believing that the banks would need to hold back 10 basis points of mortgage rate cuts out of the 25 basis points in benchmark cuts just for the rate setting to remain earnings "neutral" for the banks. Clearly that's a problem for the banks given the political pressure on them to pass on the full rate cuts.
NAB's group net interest margin of 1.79% as at March 31 2019 is already the lowest among its peers to further complicate the picture as to which bank will offer the best returns going forward.
Either way it seems clear that the likes of NAB and its big bank peers are not going to offer investors much capital growth in a falling rate environment unless the Australian economy picks up a gear.
As such these kinds of businesses would be for conservative income seekers only.
