October was a great month for ASX 200 bank shares, with share price rises across the board.
At the close of the ASX on the last trading day of the month, the S&P/ASX 200 Banks Industry Index (XBK) was up around 8% for the month, despite a bittersweet set of economic data out of the Australian Bureau of Statistics (ABS) in October.
Mid-month, the ABS released data showing that, in seasonally adjusted terms, Australia's unemployment rate increased by 0.1% to 4.7% in September. The data was well received by the market, and it dampened anxiety about another immediate interest rate increase.
But fresh inflation data at the end of the month put a spanner in the works. Late last week, the ABS announced that the consumer price index (CPI) increased by 4.3% over the 12 months to September, up from a flat 4% over the 12 months to August. Sentiment quickly reversed.
Now, financial markets and economists seem dead set on another interest rate hike. According to the ASX's RBA interest rate tracker, as of 29 October, there is an 80% chance of an interest rate hike. For context, when the ABS announced its unemployment data on 15 October, only around 18% of the market expected another hike.
So, what can we expect from ASX 200 bank shares now?
Here's a breakdown of how each major ASX 200 bank share fared in October, and whether market experts rate them a buy, sell, or hold as we brace for the next potential interest rate rise.
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What happened to the ASX 200 big four major banks in October?
Australia's banking sector is dominated by the big four banks: Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), and ANZ Group Holdings Ltd (ASX: ANZ).
Together, they make up around a quarter of the ASX 200 by market capitalisation.
There was no price-sensitive news from any of the big four banks in October, except for CBA's suspension and removal of CommBank PERLS XIII Capital Notes early in the month.
That means share price rebounds were due to shifts in investor sentiment.
At the close of the market in October, CBA shares are $166.72 each, up around 10% for the month.
NAB shares are $41.51, which is roughly a 6% increase over the month.
ANZ shares are $40.81, which is, again, around 7% higher than a month ago.
Meanwhile, Westpac shares are around 5% higher at $36.82.
What about the ASX 200 mid-tier banks?
The mid-tier ASX 200 banks also had a strong month.
Bendigo and Adelaide Bank Ltd (ASX: BEN) shares climbed 4% over the past month, to $10.78 each.
Bank of Queensland Ltd (ASX: BOQ) shares closed the month at are $7.07, which is 7% higher than a month ago.
Meanwhile, Macquarie Group Ltd (ASX: MQG) finished October at $252.44, which is 3% higher than the end of September.
Which ASX bank shares are a buy for November?
Macquarie is the only ASX bank stock rated a buy for November. Its shares gained the smallest percentage over the past month, up just 3% compared to its competitors. Brokers remain bullish, predicting it can keep climbing. Market Index has no rating on Macquarie at the time of writing, but I've found the data elsewhere. TradingView data shows that most analysts rate Macquarie a strong buy. The average price target of $270.66 implies they could rally another 7%.
Which shares do brokers rate as a hold?
Market Index data also shows that most analysts rate NAB shares as a hold. The $39.70 average target price is a little lower than the $39.88 average target price I recorded late last month. This implies they could fall around 4% over the next 12 months.
It's a similar story for ANZ shares. Most brokers also have a hold stance on the major bank, but it looks like some are shifting towards a buy rating. The $36.05 average target price is unchanged from last month. However, after the latest share price rally, this forecast suggests ANZ shares could fall 12% over the next 12 months.
Bank of Queensland shares are also on the hold list. The data shows the average target price of $6.08 has climbed slightly since last month, when I recorded it at $6.06. However, this still implies a downside of around 14%.
Which ones do brokers rate as a sell?
Australia's lender, CBA should benefit from a potential interest rate rise. However, experts continue to rate CBA shares as a sell. Market Index data shows all brokers have a strong sell rating on the ASX bank shares. The average price target is unchanged at $125.20. After the October rebound, a downside of around 25% from here is implied. That's the largest forecasted downside of any of the ASX banks.
Experts also rate Westpac shares a sell, though sentiment appears to be shifting. Market Index data shows most brokers rate the stock a sell, and the average target price remains unchanged at $34.18. This implies a downside of around 7%.
Brokers are also bearish on the outlook for Bendigo and Adelaide Bank shares. Market Index data shows most have a sell rating, and the $10.06 average target price (unchanged from last month) also implies about a 7% downside.
Foolish Takeaway
With the RBA's decision set to be handed down tomorrow, ASX investors may be re-evaluating their banking exposure. Based on expert price targets, Macquarie is the standout candidate. Meanwhile, Australia's biggest lender, CBA, continues to receive sell ratings across the board.
