Big banks vs disruptors
The major banks make consistent profits and pay solid dividends, but they seem unjustifiably expensive. Competitors are looming and winning share but their share prices are not for the faint-hearted.
The extraordinary run of major bank share prices is being tested today, with a savage broader selloff hitting all of the 'big four' (at the time of writing Commonwealth Bank and National Australia Bank are down about 3%, with Westpac and ANZ falling by nearly 4%).
Nevertheless, it has still been a remarkable run over the past year, with no truly convincing explanations for it. Perhaps the most cogent theory — given ownership data — is that buying has been coming from algorithmic trading and index funds, not humans.
The big four's share prices are clearly divorced from fundamentals, but that story has also shaded the increasingly diverse range of competition nibbling away at markets they once dominated.
The most obvious competitor is Macquarie Group, memorably pinged by the Australian Competition Tribunal as the “maverick” in the home lending market but also aggressively pursuing growth in business lending and deposits.
