The S&P/ASX 200 Index (ASX: XJO) gained 2.4% in July, but only one of the seven ASX 200 bank stocks we look at below managed to finish the month in the green.
As you're likely aware, most Aussie banks outperformed the market in 2024 and into 2025.
Commonwealth Bank of Australia (ASX: CBA), Australia's biggest bank, led the charge. CBA shares hit an all-time high of $191.40 on 25 June, which saw shares up more than 45% over the prior 12 months.
But July was a different story, with CBA shares sinking 3.7% over the month.
CBA was joined in the red by:
- National Australia Bank Ltd (ASX: NAB), with shares down 1.1% in July
- Westpac Banking Corp (ASX: WBC), with shares down 0.1% in July
- Bendigo and Adelaide Bank Ltd (ASX: BEN), with shares down 3.1% in July
- Bank of Queensland Ltd (ASX: BOQ), with shares down 2.6% in July
- Judo Capital Holdings Ltd (ASX: JDO), with shares down 3.2% in July
The only ASX 200 bank stock to post gains in the month just past was ANZ Group Holdings Ltd (ASX: ANZ). ANZ shares finished July up 5.4%, well ahead of the one-month gains posted by the benchmark index.
Image source: Getty Images
Why did the ASX 200 bank stocks broadly underperform?
There was no price-sensitive news released by any of the banks mentioned above in July.
But headwinds appear to be building as the long-awaited rotation out of the big banks looks to be gathering momentum.
Although the Reserve Bank of Australia (RBA) held tight on interest rate cuts following its 8 July meeting, easing inflation figures released later in the month have most analysts convinced the central bank will cut at least twice more this year.
And that could erode some of the enviable profitability most of the ASX 200 bank stocks have enjoyed in a higher rate environment.
As Macquarie Group Ltd (ASX: MQG) noted at the end of June, "The divergence between bank share price performance and the earnings outlook continues to grow."
The broker said it expects "earnings headwinds" from lower interest rates over the year.
According to Macquarie:
While most analysts and investors acknowledge the negative impact of rate cuts on margins, it appears this is not yet reflected in consensus earnings.
Share prices benefited from earnings resilience and minor upgrades throughout this year, but we see a 2-5% downside risk to EPS [earnings per share] in FY26, which should weigh on share prices.
The broker said that the ASX 200 bank stocks face potentially lower margins in business lending in the year ahead, while the Aussie mortgage market remains highly competitive.
