ASX 200 bank shares have had a ripper six months of share price growth. This period has included new multi-year highs for all bank stocks except one and a new all-time peak for the biggest of the bunch.
Australia's biggest bank, Commonwealth Bank of Australia (ASX: CBA), once again reset its record high on Friday, reaching $128.25 per share.
This put it within striking distance of overtaking mining behemoth BHP Group Ltd (ASX: BHP) as the most valuable company on the ASX 200 by market capitalisation.
BHP is the biggest mining company in the world, with a market cap of $218.5 billion at its intraday high on Friday. At CBA's peak share price yesterday, its market cap was approximately $214.6 billion.
Also this week, National Australia Bank Ltd (ASX: NAB) shares reached a nine-year high of $36.42, and Bendigo and Adelaide Bank Ltd (ASX: BEN) soared to its highest price in almost five years at $11.42.
All of the Big Four ASX 200 bank shares, along with Macquarie Group Ltd (ASX: MQG) and Bendigo Bank, have hit multi-year peaks this year. The Bank of Queensland Ltd (ASX: BOQ) is the only exception.
As shown below, talk of interest rates nearing their peaks back in November set off this run of price growth.
Such a sustained run is a bit unusual, given ASX 200 bank shares are traditionally seen as dividend shares, not growth stocks (with the exception of CBA and Macquarie).
So, can the good times keep rolling in FY25? Let's find out.
What the experts expect from ASX 200 bank shares in FY25
In a note this month, Goldman Sachs said ASX 200 bank shares valuations are "skewed to the downside" from here.
The broker notes that Aussie banks' return on tangible equity (ROTE) was the world's second-highest on average in 2015. Today, the banks' ROTE is the lowest of comparable global banks. This is due to compressed net interest margins (NIMs) and reduced low capital-intensive non-interest income.
Despite this, ASX 200 bank shares remain the most expensive in the world. The broker notes that "this valuation discrepancy has expanded in recent times, despite weaker relative profitability".
The broker said: "We recently took a more negative view on Australian banks, reflecting absolute and domestic relative valuations being heavily skewed to the downside."
Philip King, CIO at Regal Funds Management, said Australian banks are being "attacked from all angles" by new competitors.
They include buy now, pay later operators, non-bank lenders, and the burgeoning private credit sector.
King is holding a short position on CBA shares. He expects earnings per share (EPS) to fall over the next 10 years.
Schroders head of Australian equities Martin Conlon says ASX 200 bank shares' profits will be "flat at best" unless they can wind back costs, which is difficult for any business to do in today's economy.
Conlon said: "We have very indebted consumers already. Getting them more indebted is tricky."
Asset Management portfolio manager Dominic Mlcek says ASX 200 bank shares are facing a "negative environment". He questions their "lofty valuations" today.
"Given the lack of growth outlook in our view, we're maintaining an underweight exposure towards the big four," Mlcek said.
In light of all this, let's take a look at some 12-month share price targets for the ASX 200 bank shares and compare them to where they are trading today.
Bank share prices compared to FY25 targets
On Friday, Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares closed at $28.94, down 0.86% (see our FY25 outlook article). UBS has a price target of $30. Goldman has a buy rating and target of $28.15.
Westpac Banking Corp (ASX: WBC) shares finished at $27.24 on Friday, down 0.037% (see our FY25 outlook article). Goldman Sachs has a sell rating and target of $24.10. Morgans has a hold rating and target of $24.15. Citi has a sell rating and a $24.75 target. Morgan Stanley has an underperform rating and a $24.50 target.
NAB shares closed at $36.21 on Friday, up 0.055% (see our FY25 outlook article). UBS has a sell rating on NAB shares due to a "fully valued" price. Its 12-month target is $30.
The CBA share price ended the session at $127.68 on Friday, down 0.055% (see our FY25 outlook article). UBS has a $105 price target on CBA shares. Goldman Sachs has a sell rating and a 12-month price target of $82.61.
Macquarie shares closed at $199.03 on Friday, up 1.29%. Morgan Stanley has a buy rating on Macquarie shares with a price target of $215.
Bank of Queensland shares closed at $5.83 on Friday, down 0.17%. Goldman Sachs has a sell rating on BOQ shares and a 12-month share price target of $5.44.
Bendigo Bank shares finished the week at $11.33 per share, down 0.088% on Friday. Goldman Sachs has a neutral rating and a 12-month price target of $10.51.
