While some analysts and fund managers are viewing the decline as a buying opportunity, others are avoiding the sector amid sharp interest rate increases.
Investors are divided about whether bank stocks should still have a position in their portfolios following aabout the economic impact of aggressive rate increases by the Reserve Bank.
“When rate increases go beyond a certain point, the market becomes concerned that there is no benefit to banks from higher NIMs as they get absorbed by worse operating conditions and impairments. And I think we are close to that point now,” said Nick Vidale, equity analyst at T. Rowe Price. T. Rowe said it would not be surprised if CBA and NAB suspended their most recent buybacks in light of developing macroeconomic conditions.
As for the market’s worries that higher interest rates will increase loss provisions and that a recession is looming, Mr Hamson said those fears were exaggerated.
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