There is a dividing crack amongst the Big 4 Banks’ (ANZ, CBA, NAB and WBC) share price performances. This crack has been exacerbated over the last month after the Australian share market whipsawed up and down 400 points.
For those of you who have been on holidays, well done. Rarely does something as significant happen at this time of year, except the odd sneaky announcement (AHF’s announcement on 29 Dec 2015 took them up 100%+ for the day), or a timid slip into voluntary administration (Dick Smith, with the warning bells flashing last month).
We first looked at the dividing crack within the Big 4 Banks of Australia in December. We noted that ANZ and NAB were falling further behind CBA and WBC, this crack has only grown over the last month. What will surprise many is that CBA is 3.5% higher than NAB since 15 December (at the time of writing), and ANZ isn’t much better than NAB.
These cracks expand into the difference between a good portfolio and bad. There is a 160% performance difference between CBA and NAB (before dividends) over the last 15 years (see chart below). Over this time markets have shown that the strong get stronger (CBA since 1996 – Blue) and the weak stagnate (NAB since 1998 – green) or, have the possibility to end up looking a little like Dick Smith (DSH).
Here’s a bit more info on this current bank de-coupling:
– For those who like the number crunching to compare banking stats from the last Reporting Season;
– For the more visual readers, a picture tells a thousand words in the chart below. The vertical black line in this chart is the last time we looked at this same comparison.
The only notable differences in these four companies since mid-December are that NAB and ANZ had their AGMs on 17 December 2015.
Note: CBA reports on a different cycle, and had their AGM on 17 November 2015. WBC AGM was on 11 December 2015
The approx. 3.5% underperformance of NAB and ANZ is a large amount, especially in less than one month – see chart below. Put that 3.5% difference in the context of early 2015, less than 12 months ago – many investors were scrambling for a 4%-and-change annual cash dividend from these same Big 4 Banks. NAB and ANZ have lost that much on CBA in about three weeks’ time.
So why has this crack emerged and why is it getting bigger? What are NAB and ANZ doing wrong?
Yes, we did look at the early warning bells last month, and the key metrics to compare between the Big 4 had been citied. The early warning bells were the end of the Yield trade that started in mid-2012 and the ANZ and NAB had the title as the Dogs of the Big 4.
Almost a month later the two differences are mere time and the AGMs for NAB and ANZ. Again, this brings us back to management and the market’s faith (or losing faith) in their abilities to successfully drive the respective NAB and ANZ ships forward.
NAB’s management team have the added haze of whether the market is, or isn’t, pricing in ‘value’ for the Clydesdale spin-off.
Whatever the reasoning, there is clear a divergence within the Big 4 and it is getting bigger. Is this time to Drop NAB and ANZ in favour of WBC and CBA, or move on to greener pastures?
