It has been another very disappointing day for the S&P/ASX 200 Index (ASX: XJO) and particularly the big four banks.
All four banks have fallen heavily today, with three of the banks recording double digit share price declines.
Here is the state of play in the banking sector this afternoon:
- The Australia and New Zealand Banking Group (ASX: ANZ) share price is down almost 11% to $16.31.
- The Commonwealth Bank of Australia (ASX: CBA) share price has fallen 8% to $58.11.
- The National Australia Bank Ltd (ASX: NAB) share price has dropped 12% to $15.89.
- The Westpac Banking Corp (ASX: WBC) share price has crashed 11.5% to $15.69.
Given their weighing in the ASX 200, they have played a big role in the benchmark index's 7% decline to 4,930.4 points this afternoon.
Why are the big four banks crashing lower?
Investors have been selling the banks due to the potential impact the coronavirus will have on both the Australian and global economy.
There are concerns that the spread of the virus could stifle economic growth, lead to a spike in bad debts, increase unemployment, and put pressure on the Reserve Bank to take action.
That action is likely to be another cash rate cut and then potentially the dreaded quantitative easing.
The latter is the biggest concern for the banks and could put significant pressure on their net interest margins, their profits, and ultimately the dividends they pay.
Should you buy the dip?
When the dust settles on this market volatility, I think the big four banks would be well worth considering.
And while I feel it is safe to say that they are all quite likely to trim their dividends in FY 2021, the dividend yields that will be on offer will almost certainly be significantly better than what you'll find from their term deposits or savings accounts.
In my opinion, this makes them attractive options in this low interest rate environment.
