As you might expect, some of the biggest blue-chip winners this week so far have been the major ASX bank shares.
Today, the S&P/ASX 200 Index (ASX: XJO) looks set to stage another remarkable day of recovery on the markets. The ASX 200 is up around 2.6% today at lunchtime after rising as high as 3% during morning trade. This comes on top of a record 7% gain yesterday.
At the time of writing, Commonwealth Bank of Australia (ASX: CBA) shares are up 4% today to $66.50.
Westpac Banking Corp (ASX: WBC) shares have risen 7.67% to $17.40.
National Australia Bank Ltd (ASX: NAB) shares have risen 5.98% to $17.28.
And Australia and New Zealand Banking Group (ASX: ANZ) shares are enjoying a 5.45% bump to $17.70.
Of course, the ASX banks are coming off extremely low bases. Before this coronavirus stock market crash, these companies were trading at prices roughly 30-50% higher than today's bids.
But last week, NAB, Westpac, and ANZ were all at levels not seen since the GFC eleven years ago. In fact, you'd have to go back to the 1990s to find NAB's pre-2020 low.
Have the banks bottomed out?
It certainly seems that way. The market has clearly decided that the banks had been oversold. Affirmations from the government and the Reserve Bank of Australia (RBA) guaranteeing liquidity and access to capital would have also likely helped the banks' case with investors.
Even if the markets turn again and selling pressure resumes, it is possible that investors won't treat banking shares with the same disdain they have been showing in recent weeks in light of this government assistance.
Are the ASX bank shares a buy at these levels?
In saying that, significant headwinds remain for the banks. Interest rates near zero will make it difficult for these companies to make the same kinds of profits investors are used to. And the government is making it clear that the banks will have to be extremely accommodating for anyone not able to pay their mortgages and loans in the coming months – not things that are especially helpful for a balance sheet.
I think the banks will come through this period reasonably intact, but all the same, I wouldn't expect the maintenance of trailing dividend yields in 2020 and even 2021 because of the headwinds mentioned above. Thus, I wouldn't be loading up on CBA, Westpac, NAB or ANZ shares for income's sake in this market.
