ASX bank shares have been amongst the hardest hit ASX companies over the last two months.
Even though the markets have seen a strong recovery over the last two weeks (enough to officially end the bear market), the ASX banks have barely lifted from the multi-year lows that we saw in March.
Take Commonwealth Bank of Australia (ASX: CBA) for instance. Today, CBA shares are trading for $60.52 (at the time of writing). This is a lot closer to the 52-week low of $53.44 than the pre-crash high of $91.05.
It's even worse for the other three 'majors'. Westpac Banking Corp (ASX: WBC) is still stuck under $16 today after going as low as $13.47 in March (Westpac's 52-week high is $30.05).
It's a similar story for National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).
Can the ASX banks ever regain their former glory?
Maybe, but I don't think it will be soon. The banks are being buffeted by several strong headwinds right now. First and foremost being the economic consequences of the coronavirus-induced shutdowns. Homeowners and businesses around the country are under immense pressure at the moment, with many not being able to service their mortgages and loans at all right now. I see this tragic trend continuing until at least the end of the year. Property prices are also set to take a huge hit, which will further dampen banking profits.
Secondly, interest rates are close to zero today. That means ASX banks have to offer home loans at very close to the rate of inflation right now. There's not much profit in that. And with rates so low, customers aren't being incentivised to keep their cash in the bank anyway – further reducing the capital at the banks' disposal.
We already know that this year's banking dividends are going to be a shadow of their former glory. I can't see them substantially recovering until some of these headwinds abate, which frankly could take years.
Foolish takeaway
There might, just might have been some value in the ASX bank shares when they hit their March lows, but I'm not interested even at today's historically depressed prices. There are little prospects for growth in the medium-term, and we don't know yet how deep the banks will cut their dividends. As such, I think there are better ASX income opportunities to be found elsewhere in the current market.
