The big four banks, 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), are some of the most talked about shares on the Aussie market.
All that ink is spilled about this handful of companies for good reason. Our biggest four banks make up a massive slice of our economy, and their shares a huge part of the ASX. In terms of large, relatively stable income investments, there's little else on Aussie shores that compares. But that rosy picture has seen some cracks lately.
Falls in real estate prices for much of 2019 have thrown up fears about the banks' collective dependence on the housing market. There are also some lingering concerns over the problems of culture and misconduct that such extended boom times have caused to creep into the system, as seen in the recent Royal Commission into the industry.
Australian investors can't afford to ignore the big four banks, but is now the right time to buy in?
Slow improvement
There's no denying that 2019 began as a nightmare year for the Australian banking sector.
However, while the Royal Commission certainly grabbed a lot of headlines, and can be blamed for some short-term volatility, the long term consequences for ANZ, NAB, Westpac and CommBank haven't been too punitive. Ultimately, one question will do far more to determine the big four banks' share price futures:
Could a real estate recovery save the big four banks?
To tell us where ANZ, Westpac, CommBank and NAB's share prices are headed long term, we must ask if real estate is headed back up sustainably, or if we're just seeing a dead cat bounce.
Industry experts and economists are cautiously optimistic. Auction clearance rates have gradually been edging upward, with Domain reporting that 82% of auctions cleared over the weekend in Sydney, and 76% in Melbourne. Adelaide, Brisbane and Canberra saw clearance rates of 79%, 64% and 69%, respectively.
These numbers are on lower volume than previous years, true, but if the trend continues that's likely to change. All of which will be good news for Australian bank shares.
The big four banks are a huge part of the Australian economy. Unless we see the kind of massive destabilising event that would be devastating for the entire economy, all four of ANZ, Commonwealth Bank, Westpac and National Australia Bank are likely to hang onto their leading positions in the ASX. Having suffered through a tough start to the year, they now look set to recover, making today a good time to top up your holdings.
