The S&P/ASX 200 Index (ASX: XJO) bank stocks have been judged by the broker UBS. And things are not looking as positive as they did before.
The broker has considered a number of ASX 200 banks including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Bank of Queensland Limited (ASX: BOQ).
Of course, share prices are changing all the time, so deciding which one is the best value can change from month to month.
Here's what one UBS analyst had to say.
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What's going wrong for ASX 200 bank stocks?
According to reporting by The Australian, UBS analyst John Storey said:
Recent events in the US and Europe in our view have lowered the confidence threshold of investors for banks in their portfolios.
Australia is no different, with the ASX banking index now down about 6.5 per cent year-to-date compared to the market falling 1.5 per cent.
The UBS expert also said that bank funding costs could move higher, that there will be stronger competition for deposits, bad debts will go higher, and there will be more bank regulation.
UBS' latest analysis led to it updating the earnings per share (EPS) forecasts for the banks. These look to reflect the impacts of those expectations of a weakening position for ASX 200 bank stocks.
With that in mind, UBS reduced the estimates for ASX 200 bank stocks for FY24 and FY25 EPS by between 6% to 8% and the average price target was reduced by 18%, according to The Australian.
A broker's price target is an indication of where the experts think the share price will be in 12 months from the date of the forecast.
The ANZ price target was reduced by 17% to $25, with a buy rating.
BOQ shares were rated as a sell, with a price target cut by 25% to $6.
Next, Westpac's rating was reduced to neutral, with a price target of $22.50, a reduction of 17%.
For CBA, UBS decided to reduce the price target by 1% to $100, with a neutral rating.
With NAB, the broker's rating is a sell and the price target was cut by 24% to $25.
The NAB share price is currently trading at around $27.50, which represents a possible reduction of 9% over the next year.
Foolish takeaway
Time will tell how this plays out for the ASX 200 bank stock sector, but I can't see how arrears stay at cyclical lows with how interest rates have risen so steeply.
But, for me personally, NAB has improved the most over the last few years and it's worthy of being thought of as a higher-quality choice these days. But, we'll see which UBS predictions play out.
