Easing macroeconomic headwinds are helping push ASX big bank shares higher but not all four big bank share prices are likely to outperform the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index through to 2020.
The bank stock that is tipped to be the laggard in FY20 is the Australia and New Zealand Banking Group (ASX: ANZ) share price, according to the analysts at Macquarie Group Ltd (ASX: MQG).
That's bad news for investors hoping to use the "Dogs of Dow" strategy to pick bank stocks as ANZ Bank is the worst performing big bank over the past year as the ANZ share price fell around 3%.
Don't expect a turnaround
In contrast, the Commonwealth Bank of Australia (ASX: CBA) share price has rallied 12%, the Westpac Banking Corp (ASX: WBC) share price has gained around 7% and the National Australia Bank Ltd. (ASX: NAB) share price has added 4%.
The Dogs of Dow theory hypothesises that last year's worst performing large cap stock will make a turnaround in the following year as businesses moves in cycles.
But ANZ's woes may take longer to fix as the lender is losing market share to other banks.
"While pricing, geographical differences, and service levels possibly explain ANZ's ~1.5% market share gain between 2012 and 2017, it appears that its approach to credit assessment may also have been a contributing factor," said Macquarie.
"Recent changes in underwriting standards, challenging growth trends in WA and deterioration in service levels likely had an impact on ANZ's performance. While we expect this to persist in the near term.
"In our view, ANZ's relative underperformance will continue but moderate in FY20."
More challenges to overcome
The broker did a market survey and found that ANZ is viewed by borrowers as being the most uncompetitive lender.
Further, the time ANZ takes to approve loans is longer than the other big banks and that's a turn-off for not only borrowers but mortgage brokers who are more likely to steer their clients to other banks.
There are a few other interesting things that Macquarie had uncovered about the industry. The broker noted that having kids works against borrowers as households without dependents were least affected by tighter credit availability.
Luckily, I am not looking for a loan or I might have to put my kids up for adoption.
Another finding by Macquarie also explain why Australian households are the most indebted in the world.
"Compared to the global peers, Australian borrowing capacity remains ~30% higher, leaving the interest burden on the Australian households above global peers (~25% vs ~17%), despite our record low variable interest rates vs. a higher prevalence of fixed rates across other markets," said Macquarie.
"Our preference is for NAB/WBC over ANZ/CBA. We also prefer all majors to the regionals."
