ASX 200 bank shares have outperformed the major Australian benchmarks by a country mile so far in 2024.
The S&P/ASX 200 Banks Index (ASX: XBK), which tracks the banking sector's performance, has rallied more than 31%, against a nearly 9% return for the S&P/ASX 200 Index (ASX: XJO), which represents the broad market.
The index closed at a new all-time high on Monday.
For shareholders in the banking majors, that is Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and ANZ Group Holdings Ltd (ASX: ANZ), it has consequently been a superb year.
The combo of meteoric gains in market value, and succulent, expanding dividends to fill the investment coffers.
Flavoursome ingredients to any soup of stocks that make up one's portfolio.
But how long can ASX 200 bank shares sustain this upward momentum? Let's take a look at what the experts say.
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What's driving ASX 200 bank shares?
One recent factor pushing ASX 200 bank shares higher might be the rebound in home loan demand, particularly for investor loans.
Recent data from the Australian Bureau of Statistics (ABS) showed a nearly 30% increase in investor loans in the twelve months to September 2024.
Investor loans are one good indicator of the underlying in the property market. Observations of their movements are equally informative.
Additionally, fierce competition in the mortgage market has pressured the profitability of big banks. When we say profitability, we aren't talking about profits or profit margins.
We are talking about returns on equity (ROE) and net interest margins (NIIMs), two critical factors that measure one bank's performance against another.
This has pushed banks to re-evaluate their reliance on mortgage brokers, according to reporting from The Australian.
Currently, brokers facilitate around three-quarters of new home loans in Australia. But the big banks are increasingly considering channelling more loans directly through digital platforms and mobile lenders.
This could potentially reduce the commissions they pay to brokers. As NAB and ANZ have recently highlighted, this shift aims to protect shrinking NIMs.
Long live the macro
Zooming out, ASX 200 bank shares have benefitted from a rising tide that lifts all boats, a tide fed by higher interest rates and a reasonably strong property market.
Baker Young made note of this, stating that "macroeconomic conditions continue to favour the banks", according to a report from The Australian.
Still, more than a handful of analysts have been wrong about the banks this year, at least from a price target perspective.
Commonwealth Bank hit $150 per share for the first time in Monday's session, setting a new all-time high.
11 out of 15 analysts covering the stock rate it a sell, and two rate it a hold.
Couple that with the new all-time highs in the ASX 200 Banks Index on Monday, and those sell ratings on CBA and other bank stocks start to look a little questionable.
Foolish takeout
ASX 200 bank shares have posted a strong record in 2024. However, factors such as softening house prices and a shifting mortgage market could be headwinds.
Whether we will see these factors reflected in the stock of these banks is another question. For now, the ASX 200 Banks Index is up 43% in the past 12 months.
