Bank shares are loved by SMSF and retail investors for their big fully franked dividends and the relatively defensive profit streams thanks to the major banks' cartel like market positions.
In fact if you held big bank shares through just 2019 you'd have generated strong total returns so far.
Take a look at the scoreboard below for total returns over 2019.
Commonwealth Bank of Australia (ASX: CBA) shares are up around 16% when including $4.32 in fully franked dividends paid out over 2019.
National Australia Bank Ltd (ASX: NAB) shares are up around 23% when including an 83 cents per share fully franked dividend payment.
Westpac Banking Corp (ASX: WBC) shares are up around 20% when including an 94 cent cents per share fully franked dividend payment.
Australia & New Zealand Banking Group (ASX: ANZ) shares are up around 17% when including an 80 cents per share fully franked dividend.
As a bonus ANZ, NAB, and Westpac will all go ex-dividend in November prior to paying out more total return boosting dividends in December 2019.
Driving the big banks' rise over 2019 is the RBA's decision to cut benchmark lending rates three times over the year in a move that has encouraged property buyers to borrow more from the banks.
In fact household credit growth climbed 3.2% in August on top of a 4.3% rise in July and 1.8% rise in June according to ABS data.
The more banks lend the more profit they can make assuming net interest margins (the difference between what they pay on what they borrow versus what they earn on what they lend) stay steady.
APRA's decision to scrap home loan serviceability assessment minimums has also added to home loan borrowers' limits and allowed the banks to extend credit growth.
On the other hand the banks are facing rising compliance and compensation costs in the wake of the Royal Commission, while leverage ratios (assets to shareholder equity) are increasing. This means any double-digit drop in asset values on the banks' balance sheets (via falling house prices) could pressure their ability to service debts or liabilities.
So while bank shares have performed well in 2019, they are far from safe or one way bets if the interest rate cycle does turn.
