The big four S&P/ASX 200 Index (ASX: XJO) bank stocks have delivered underwhelming results so far in 2026.
But their performance could be set to get even worse.
Commonwealth Bank of Australia (ASX: CBA) shares have performed the best of the big four ASX 200 bank stocks year to date, recently down 0.2% in 2026. That outpaces the 1.3% losses posted by the benchmark index over this same period.
ANZ Group Holdings Ltd (ASX: ANZ) shares have had a more difficult run, recently down 5.6% for the year.
Rounding off the list, Westpac Banking Corp (ASX: WBC) shares were recently down 9.6% in 2026, while National Australia Bank Ltd (ASX: NAB) trails the pack with a 15.1% share price loss.
The banks have all faced headwinds from three consecutive RBA interest rate hikes this year. Coupled with ongoing inflationary pressures and the Federal Budget's expected changes to negative gearing policies for residential homes, this could lead to materially lower demand for mortgage loans as well as increased bad debts.
And it appears a number of hedge funds are looking to take advantage of these mounting headwinds.
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Betting against ASX 200 bank stocks ANZ, NAB, Westpac and CBA shares
According to the Australian Securities and Investments Commission (ASIC), hedge funds have roughly doubled their short positions in the big four ASX 200 banks stocks over the past half year to $10.9 billion.
CBA shares are the most shorted among the hedge funds, with Westpac shares coming in at number two.
Firetrail Investments revealed it has held a short position in ANZ, Westpac, NAB and CBA shares since mid-April.
"The big banks are priced to perfection, and any earnings downgrades will be treated pretty harshly. Valuations are very rich for the earnings growth banks are providing," Patrick Hodgens, Firetrail Investments chief investment officer said (quoted by The Australian Financial Review).
Regal Funds also has a short position in CBA shares.
Explaining the potential mounting headwinds facing ASX 200 bank stocks, Regal Funds portfolio manager Mark Nathan said:
With banks, you always get a multiplier effect. If houses lose a bit of value, people don't feel as wealthy, they spend less money, they invest less, so you get a multiplier effect with the banks.
That's the big change since the budget. The market is less comfortable with what was previously a reasonable growth outlook, and downgrading that to a more modest growth outlook.
And Blackwattle Investment Partners' portfolio manager Joe Koh cautioned that the current $10.9 billion of short bets against ANZ, CBA, NAB and Westpac shares could well grow from here.
According to Koh (quoted by the AFR):
There could be a further wave of selling because offshore hedge funds are waiting for the budget changes to be officially passed, rather than delving into local politics and the risks of last-minute changes.
