Why are the CBA and NAB share prices firming up today?
Shares in the major banks have already recorded gains of between 45%-60% in the last 12 months.
Shares in Australia's Big 4 banks are among the most traded on the ASX boards on Friday. Commonwealth Bank (ASX: CBA), National Australia Bank (ASX: NAB), ANZ (ASX: ANZ) and Westpac (ASX: WBC) rose between 0.3%-0.9% in early trading.
Why are investors cheering bank stocks
Financial stocks have been under pressure in recent weeks over concerns that a slowdown in the Australian economy is set to impact the banking sector, which has a major exposure to large and small businesses, as well as the all important property market.
Indeed, the economy is still on course to contract in the September quarter and there is also a possibility of a similar result in the December quarter if lockdowns in Sydney and Melbourne are extended into that quarter. And, no doubt, there will be a flow through impact in the banking sector.
However, investors are focusing on 2 pieces of positive news this week. Firstly, bosses at 2 of the major banks are predicting growth will kick back strongly after a September quarter contraction.
National Australia Bank CEO Ross McEwan and Westpac chief executive Peter King have painted an optimistic outlook in appearances before the parliamentary economics committee, despite nearly half the country currently in some form of lockdown.
The business leaders expect Australia's rapidly advancing vaccination rate to help in a strong bounce-back when the restrictions are eased. They also said that, for many customers, the lockdowns had not been as financially damaging as the restrictions imposed last year.
Improving conditions
NAB said, at the end of last month, about $1.8 billion of its loans were on deferral compared to $58 billion at the height of the pandemic last year. Westpac said it currently had $2.75 billion of mortgages with repayment deferrals, down significantly from a $55 billion peak last year.
The second piece of news traders are looking at is a trading update released by Macquarie Group (ASX:MQG).
The financial heavyweight signalled that despite the economic slowdown, first half profit would significantly surpass the number from last year, largely due to favourable market conditions in its commodities and global markets unit, triggering a 5% lift in its shares.
Macquarie forecasts ongoing momentum in its banking division, particularly in the loan portfolio and platform volumes. Analysts have taken that as an indicator of the market conditions in the wider banking industry, which means the growth in earnings is not likely to drop off as much as expected.
That could be music to investors' ears, with banking shares already among the best performing on the ASX. Over the last year, shares in the Big 4 banks have risen between 45% and 60%.
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