It's not very often you can say that the Commonwealth Bank of Australia (ASX: CBA) share price jumped 13% higher.
But these are strange times and that is precisely what happened during trade on Tuesday. Australia's largest bank finished the day with an enormous 13.3% gain to $67.64.
But it wasn't just Commonwealth Bank charging higher. The rest of the big four banks got in on the action as well.
Also climbing very strongly was the Australia and New Zealand Banking Group (ASX: ANZ) share price, which finished the day with a 12% gain to $18.40.
The National Australia Bank Ltd (ASX: NAB) share price and the Westpac Banking Corp (ASX: WBC) share price were the laggards in the group with gains of approximately 7% and 8%, respectively.
Combined, they played a key role in the S&P/ASX 200 Index (ASX: XJO) storming a remarkable 5.8% higher to 5,293.4 points. This was its best daily performance in over two decades.
Why did CBA and the big four banks surge higher?
With no major news coming out of the banks today, it appears as though bargain hunters have been snapping up the big four after sharp pullbacks in their respective share prices.
Even after today's stellar gains, the banks are still down materially over the last 30 days.
For example, since this time last month, the ANZ share price is down 30.8%, the CBA share price is down 25%, the NAB share price has fallen 36.1%, and the Westpac share price is down 32.3%.
These declines have been driven by concerns over the banks' net interest margins following cash rate cuts and the impact that the coronavirus outbreak could have on bad debts in Australia.
However, whilst I suspect dividend cuts may be coming, I believe the extent of the selling has been severely overdone. In light of this, I can't say I'm surprised to see the banks rebound strongly today.
And based on current valuations and forecast dividend yields, I'm optimistic there will be further gains in the weeks ahead.
