Australian banks shares plunge $26 billion on margin pressure
Australian banks stocks plunge as margin pressure mounts
Australia’s banking sector faced a sharp downturn this week, wiping out $26 billion in market value as concerns over profitability mounted.
Two of the country’s largest lenders—National Australia Bank Ltd. (NAB) and Westpac Banking Corp.—reported increasing margin pressure, fueling investor fears about the industry’s future earnings potential, reports Bloomberg.
Banks Face Profitability Challenges
NAB’s shares have plummeted 15% over the past week, while Westpac has dropped 9.7% following quarterly revenue updates that highlighted weakening core profit metrics. The declines extended to smaller players as well, with Bendigo & Adelaide Bank Ltd. disclosing significant margin pressure in its business banking division.
The latest blow came from ANZ Group Holdings Ltd., whose stock fell 3.5% on Thursday after the company reported a rise in impaired assets due to mortgage restructures. This turmoil has reversed much of the gains that Australian banks had enjoyed in 2024, when they were among the top-performing stocks on the S&P/ASX 200 Index.
Valuation Concerns Come to the Fore
For months, analysts had raised concerns that Australian bank stocks were overvalued after a prolonged rally. This week’s sell-off suggests that those warnings may have finally materialized.
“After an extraordinary run up, the banks are finally starting to miss expectations, and the lofty valuations make them particularly vulnerable to any misses, however minor they are,” said Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney. “It’s been an underweight call for domestic managers for a long time, albeit an incorrect one, but that call looks to be working now.”
Australia’s five largest banks—Commonwealth Bank of Australia, ANZ, Macquarie Group Ltd., Westpac, and NAB—have accounted for about 70% of the total return on the S&P/ASX 200 over the past 12 months, according to Bloomberg data. With profit margins now under pressure, investors will be closely watching future earnings reports for signs of stabilization or further downside risk.
Earlier, a consortium of banks led by Morgan Stanley is preparing to sell $3 billion in senior debt tied to Elon Musk’s acquisition of X, the social media platform formerly known as Twitter.
