Why ANZ, CBA, NAB, and Westpac shares are storming higher today

Commonwealth Bank of Australia (ASX:CBA) and the rest of the big four banks are charging higher on Tuesday. Here's what's happening…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the best performing areas of the market today has been the banking sector.

The big four banks have all recorded strong gains today and are powering the S&P/ASX 200 Index (ASX: XJO) notably higher.

What's happening in the banking sector today?

Here's a snapshot of what is happening in the banking sector this afternoon:

  • The Australia and New Zealand Banking GrpLtd (ASX: ANZ) shares price is currently up 4.75% to $16.33.
  • The Commonwealth Bank of Australia (ASX: CBA) share price is up 1.5% to $59.89.
  • The National Australia Bank Ltd. (ASX: NAB) share price has pushed 4% higher to $16.38
  • The Westpac Banking Corp (ASX: WBC) share price is the best performer with a 5% gain to $16.10.

Why are the big four banks charging higher today?

With no news out of any of the banks or broker notes that I'm aware of, today's strong gains are a little bit of a mystery.

However, I suspect that investors are buying the big four banks on the belief that they have been oversold during the pandemic.

Australia will undoubtedly suffer economically from the pandemic, but the surprisingly low infection rate and the rapid reopening of the country appears to have caught even the most positive economists by surprise.

Combined with the Federal Government's stimulus packages and the Reserve Bank's rate cuts, Australia's economic future doesn't look anywhere near as bleak as other countries.

This could ultimately mean that the big four banks have overestimated the provisions they have announced over the last few weeks. Especially if a successful vaccine is developed sooner rather than later.

What provisions have the banks made?

As a reminder, National Australia Bank was the first bank to announce provisions. On 27 April it revealed an $807 million top-up to its economic adjustment to reflect potential COVID-19 impacts.

This was followed the next day by Westpac, which announced approximately $1.6 billion of additional impairment charges predominantly related to COVID-19 impacts.

Within two days, with its interim results, ANZ Bank announced COVID-19 impacts of $1.031 billion.

And the last bank to move, was the Commonwealth Bank. Earlier this month Australia's largest bank made an additional credit provision of $1.5 billion for the potential longer term impacts of COVID-19.

If things go better than expected, these provisions could be partially reversed. Which would be a big boost to their future dividends.

Should you buy the banks?

Even after their strong gains this week, I still see a lot of value in the big four banks and would be a buyer of all of them at these levels.

Though, my preference remains Commonwealth Bank due to its overall quality.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »

Two happy scientists analysing test results.
Healthcare Shares

Mesoblast share price rockets 36% on breaking FDA news

ASX investors are sending the Mesoblast share price soaring following promising FDA news.

Read more »