While 2019 was a terrific year for the S&P/ASX 200 (INDEXASX: XJO), it was a less favourable year for the big four banks, all of which battled the results of the Royal Commission, regulatory action, and dividend cuts.
We take a look at whether the ASX 200 banks can return to the spotlight in 2020.
What's in store for the big four this year?
There's no denying that 2019 could be seen as the annus horribilis for the big four Australian banks.
National Australia Bank Ltd (ASX: NAB) cut its dividend and finished the year at $24.63, up a dollar from where it started the year. Westpac Banking Corp (ASX: WBC) was also forced to cut dividends and finished the year at $24.23, down 1% from $24.48 in January 2019.
Australia and New Zealand Banking Group (ASX: ANZ) didn't cut dividends, but did cut franking credits, and finished 2019 up 3.2% over the year at $24.63. Only Commonwealth Bank of Australia (ASX: CBA) avoided cutting dividends or franking credit and finished the year up 12.6% at $79.90.
Macro tailwinds
Macro signs are pointing in the right direction for the big four banks in 2020. The United States and China are moving in the right direction regarding a trade deal. After political tension and tit-for-tat tariff policy through 2019, the political superpowers signed phase one of their trade deal in December. The improved global economic growth outlook as a result of this development should allow share markets to advance broadly.
According to an article in the Australian Financial Review (AFR), companies that stand to do well when global growth picks up include miners, energy companies and banks.
Local headwinds
Of course, there is plenty to remain concerned about on the local front. Tougher regulation remains a reality after the Royal Commission. Teams will remain embedded in each bank implementing new compliance systems and running remediation measures for the foreseeable future. Competition is likely to increase as new entrants in the form of neo-lenders and digital banks enter the market and start to make inroads into the value chain. Initiatives such as Open Banking are making it easier for new players to enter the market, increasing competition.
According to the AFR article, each of the big four banks has derated, with the exception of CBA. CBA is currently trading on a price earnings multiple of over 17, compared to ANZ's 11.47, Westpac's 12.74, and NAB's 14. As such, it might be more difficult to make capital gains on CBA.
Foolish takeaway
While macro signs are broadly in the banks' favour, local headwinds may temper these influences, limiting upside potential.
