Australia’s banks are under siege. Facing external pressure from almost every direction lately.
If it’s not the regulators, or the economic outlook, it’s themselves. A distinction that was on full display today as National Australia Bank Ltd [ASX:NAB] made a bold decision…
They have cut their home loan rate to the lowest level of any of the Big Four. A desperate attempt to woo home buyers to bank with NAB.
This development did little to placate investors though. News of the rate cut sent the NAB share price deeper into the red, down 1.3% at time of writing. The worst performer of the Big Four for the day.
The real question is, whether or not the other banks will follow NAB’s lead?
Strapped for cash
It’s no secret that the banks are in a sticky situation right now.
Not only are they coming off the back of a damning royal commission, but they’re haemorrhaging money as Australia heads towards a recession.
All the while, interest rates are at record lows and likely to stay there for quite some time. Meaning lending, the crown jewel of banking just isn’t the big money-maker it used to be.
So, even if NAB does scoop up a few new names due to this cut, the fact that they made this call at all is telling. And honestly, I wouldn’t be surprised if the other banks follow their lead.
We could see a race to the bottom for home loan rates.
For home buyers and property investors that will be music to their ears. Investors though, especially those with a heavy weighting in the banks, may need to buckle up. This very well could be the start of a far more vicious downturn than first thought for the Big Four.
However, as Profit Watch’s editor — Callum Newman — recently surmised, it may not come to that. He believes there is a strong chance we could see an RBA-led bailout of the banking sector. That’s on top of the measures that have already been put in place…
What that will all mean when everything is said and done is unclear.
It will all depend on the details of any and all plans that arise. Either way though, as an investor now is probably not the best time to dive back into the banks. Not with all this market and policy uncertainty.
Instead, why not consider looking for stocks that are more resilient. Companies that have proven they can withstand even the worst volatility that this pandemic has wrought.
Check out our full report on Coronavirus Resistant Stocks, for more details.
Because right now, every investor needs to have their wits about them. When the banks start making moves like they have been, the whole market gets a little nervous.
For Profit Watch