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Will ASX banking shares rebound in October?

It’s no secret that Aussie bank share prices have struggled to climb higher in the last 12–18 months.

The biggest factor has been the fallout from the 2018 Financial Services Royal Commission, while recent interest rate cuts and slowing earnings have also played their part.

But despite their struggles in 2019, could ASX banking shares rebound before the end of the year?

How have the ‘big four’ banking shares performed in 2019?

The National Australia Bank Ltd (ASX: NAB) share price has been the best performer out of the big four in 2019. The NAB share price has climbed 19.30% higher throughout the year to $28.19 per share at the time of writing, while also boasting an 6.45% dividend yield.

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) share prices have gained 15.26% and 17.40%, respectively, while Commonwealth Bank of Australia Ltd (ASX: CBA) has climbed just 10.93%.

The Commonwealth Bank share price has underperformed the S&P/ASX 200 Index (INDEXASX: XJO) by nearly 8%, but is the only member of the big four to have reported its full-year earnings.

Australia’s largest bank reported an underlying cash profit of $8.5 billion in August, which missed estimates and saw disappointed investors sell-off CBA shares.

With the other three banks set to report their results in late October or early November, I think it will take something special to push their share prices higher.

What about other ASX banking shares?

Leaving aside the wealth management shares such as Magellan Financial Group Ltd (ASX: MFG), the non-major banking shares have struggled even more in 2019.

During the Royal Commission, there were thoughts that Commissioner Kenneth Hayne would recommend structural separation and give the industry a major shake-up.

Regional banks such as Bank of Queensland Limited (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN) would have been well-placed to capture more market share if the big four were restricted.

However, these recommendations were not made in Commissioner Hayne’s report and regional banking share prices have remained low ever since.

The Bank of Queensland share price is trading at $9.58 per share, up just 0.74% since the start of January, while the Bendigo Bank share price has climbed 7.63% to $11.29 per share.

Foolish takeaway

If you’re looking to invest in banking shares, it seems that the big four banks are still the kings of the ASX Financials sector.

Bank of Queensland does offer a tidy 7.94% dividend yield, but I think NAB’s 6.45% per annum is still a better option, given its relative size and stability.

I don’t have high hopes for the remaining earnings results in the coming month and think that Magellan could be the best Financials sector option at the moment.

For those wanting other high income dividend options, I'd check out these 3 ASX stocks right away!

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. 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 Scott Phillips.

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