Most ASX bank shares are underperforming the broader market in 2023, and top broker Macquarie sees more downside risk ahead.
Let's check out the state of play for the biggest ASX 200 bank stocks over 2023 so far.
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Bank shares relatively weak in 2023
Over the year to date, the benchmark S&P/ASX 200 Index (ASX: XJO) has risen by 5.3%.
Let's compare this to the performance of the bank stocks.
The share price risers (as at the close of trade on Friday):
- The Macquarie Group Ltd (ASX: MQG) share price has risen 10.9%
- The ANZ Group Holdings Ltd (ASX: ANZ) share price has ascended 9.6%
- The Commonwealth Bank of Australia (ASX: CBA) share price has risen 3.1%.
The share price fallers:
- The Bank of Queensland Ltd (ASX: BOQ) stock price has dropped 12.3%
- The National Australia Bank Ltd (ASX: NAB) share price has tumbled 5.06%
- The Bendigo and Adelaide Bank Ltd (ASX: BEN) stock price has declined 4.4%
- The Westpac Banking Corp (ASX: WBC) share price has fallen 3.2%.
Where to from here? Down, down, down…
According to reporting in The Australian, Macquarie says:
We see limited scope for banks to re-rate from current levels and believe the risk to multiples in the near term remains skewed to the downside, while investors remain concerned with potential credit quality issues stemming from economic slowdown.
In the medium term, while banks appear cheap on an absolute basis and compared to their recent history relative to the broader market, we expect discounted valuations to persist until there is more clarity on the economic outlook.
Why Macquarie is wary of bank stocks
The threat of recession in the United States, Australia, and other nations still looms.
Macquarie says in the lead-up to past recessions, relative multiples for bank shares have contracted by about 10% to 30%. At this stage, the contraction among the banks is sitting at 3%.
Macquarie also expects a 1% to 5% downgrade of consensus earnings estimates for FY24.
Macquarie is neutral on ASX bank shares for the moment.
Its order of preference among the big four is NAB shares, then Westpac, ANZ, and CBA shares.
Among the regionals, Macquarie analysts prefer Bendigo and Adelaide Bank shares over Bank of Queensland shares.
Westpac is currently forecast to pay the greatest dividend yield of the banks in FY24, according to our survey of recent broker predictions.
If you're curious as to why Macquarie shares are outperforming, it may be due to a key differentiator in its business compared to the other banks.
