CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

ASX bank stocks plunge, J.P. downgrades ANZ to Neutral

Bank stocks fall with the broader market, J.P. Morgan raises their price targets on the big four banks.

ASX banks Source: Bloomberg

ASX 200 and banks fall in unison

During the market madness of March – the Financials Index (XFJ), which makes up 26.4% of the ASX 200 – bottomed out at 3,591 points.

Since then, the Financials index has rallied strongly, last trading at 4,859 points, implying a move of ~35% from those March lows. Individual bank stocks have moved up in step, with the big four banks ripping higher over the last couple of weeks, as investor concerns about the economic damage of the coronavirus somewhat subside and the prospect of bank dividend payments resuming surface.

That bullish trend hit a mild setback today, with ANZ falling 6.21%, WBC dropping 6.09%, CBA shedding 4.41% and NAB plunging 5.41%.

The ASX 200 also finished the session 187 points lower, at 5,960 points, breaking a seven session winning streak in the process.

ANZ, CBA, Westpac and NAB share prices: the analyst outlook

While J.P. Morgan thinks Australia’s banking sector is justifiably valued at a price-to-book multiple of ~1.3x – the current price targets the investment bank has on some of the big four banks, specifically ANZ, NAB, and Westpac, suggests there remains potential upside for investors at current price levels .

Centrally, in a note released today, J.P. Morgan analysts argued that ‘Deposit pricing suggests NIMs [net interest margins] to be better insulated than previously expected,’ with system deposits significantly increasing over the last few months.

Bank net interest margins have faced significant pressure in recent times, with Australia’s official cash rate currently sitting at 0.25%.

Interestingly, J.P. Morgan made the observation that since January 'we started to see the banks more aggressively reprice their deposits downwards,’ though it was flagged that on average, the banks ‘only reduced their deposit rates by about 50% of the move in the cash rate.’

Moreover, the investment bank went on to say that the Bank Bill/ Overnight Indexed Swap (BILL/OIS) spread recently falling into negative territory should also prove supportive of bank net interest margins.

Overall, as a consequence of net interest margin, liquidity, deposit and funding trends, J.P. Morgan’s analysts upgraded their retail bank earnings outlook and lifted their price targets (PTs) on all of the big four banks: ANZ (PT: $20.02), CBA (PT: $62.65), NAB (PT: $21.64) and Westpac (PT: $20.13).

In response to lifting ANZ's price target 11.2%, J.P. analysts lowered their rating from Buy to Neutral.

How to trade bank stocks

Where do you stand: are you bullish or bearish on the big four's prospects? Whatever your view, you can trade the likes of ANZ, CBA, Westpac and even NAB – long or short – using IG’s world-class trading platform now.

For example, to buy (long) or sell (short) CBA using CFDs, follow these easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘CBA’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.