Weak bank shares caused most of the damage to the Australian stockmarket market in the March quarter and pushed the ASX 200 to a level lower than it was at the end of the March quarters in 2017 and 2016.
And they started the second quarter yesterday with another less than impressive performance as the wider market shook off the slide on Wall Street on the first day of the month and quarter on Monday.
There were further losses in the major banks – including a 1.1% fall for ANZ shares. Smaller falls of 0.07% were reported for the Commonwealth, while the NAB lost 0.2%, and after early losses Westpac shares ended 0.03% higher at the close.
Rises by resources stocks helped hold the day’s loss to 7.5 points for the ASX 200 which ended at 5,751.
The weakness of the shares in the big four banks in the past year, and especially in the first three months of 2017 has been the major factor behind the slide in the market.
That’s despite the market hitting its highest level since before the GFC in the final week of 2017. The ASX 200 peaked in late December 2017 at 6,122, and fell 6% to the end of March – that’s despite the best business conditions ever recorded in the National Australia Bank’s monthly surveys and the strongest run of new job creation since 1978 when the current system of measurement was started.
More than 730,000 new jobs have been created and the jobless rate has fallen to 5.5% and yet investors don’t seem to realise that.
The ASX 200 ended the quarter on 5,759. That was 1.7% lower than a year ago when the ASX 200 ended the first quarter on 5,864 and 2.3% lower than the first quarter end in 2016 of 5,898.
For the March 2018 quarter the ASX 200 index fell 306 points, or 5.04%. Local investors have only suffered two worse March quarters over the past 25 years – a 15% in 2008 and a 6.3% loss in 1994.
The start to the June quarter yesterday was more in the same vein after that rough session on Wall Street on Monday until the late rally.
If you look deeper – the sell-off, especially in the past year and last three months, has been driven by the slide in value of the big four banks.
If you had to single out the dominant factor in the market’s weakness, it has been the banks and the way their dirty linen is finally being aired for all to see.
It is ugly and for investors it has been value-destroying. But it is all their own work as some politicians (mostly the ALP and Greens), customers and some shareholders have said enough and want endemic cultural, governance and managerial problems resolved.
The financial toll has been heavy: the big four – the Commonwealth, Westpac, ANZ and NAB – have seen tens of billions of dollars value evaporate as their shares have slid by between 14.9% (NAB) and 18.8% (Westpac) in the past year, and by 3.6% to 10% in the three months to March. The loss of value for the big four for the past year is more than $63 billion – with nearly half, or more than $28 billion disappearing in the March quarter alone.
The falls are more moderate in the two years from April 1, 2016 in the case of Westpac, down 9.7%, the CBA, down 4.6% and the NAB, down 6.2%. Only the ANZ has seen its shares rise over the two year period – by 7.3%, but all that evaporated in the past year and the shares are off 16.7%.
CBA shares are down 16.4% in the year to March 2018.
After years of denial by banks the reports and complaints of bad behaviour and worse are coming to the fore. Dud loans, ripping off customer loans, fees and charges, rorting key market interest rates, not complying with money laundering laws (especially the Commonwealth and the NAB).
On top of that we are seeing from the Royal Commission apparent fraud in lending for home loans, credit cards and personal loans, lending to criminals, lending to people with no income, the interest only loan deals and the scamming of investors and others through self-dealing, weak financial advice and dud insurance policies which saw claimants denied their rights – it’s an already long list that will only get longer again when the Royal Commission resumes on Monday week.
Media reports on Tuesday said the CBA had resisted attempts by key bank regulator, APRA to get accurate loan data. That confirms the contempt the big banks have for regulators.
