Back in February I posed the question; Time to Buy the Big Four? At that time I noted that:
...considering the pummeling their counterparts in the US and in some parts of Europe have taken, the share prices of Australian banks have held up relatively well. That's mainly because their profits have held up well and they have steered clear of the sub-prime meltdown....for now.
'For now' is the important part. As we move further into the sour end of the credit cycle we can expect profits to slow and bad debts to rise.
As we now know, ANZ and NAB weren't able to avoid some the problems of their overseas counterparts. CBA and WBC have been able to ....so far. Whilst CBA and WBC have avoided subprime related problems, as predicted they have had to raise their doubtful debt provisions significantly and as noted last week, impaired assets are now rising sharply.
6 months ago I predicted that investors would get opportunites to pick up bank stocks at more attractive prices down the road. Since then all 4 major banks stocks have moved lower, ANZ and NAB considerably so.
I see no reason to change that view. 6 months ago signs were beginning to appear that the Australian economy was slowing - following the US and European lead. Those signs have now been confirmed and in such an environment coupled with continued strains in credit markets, banks will continue to do it tough.