What’s really to blame for Australia’s banking woes?
There is no doubt that the Royal Commission has seriously damaged the share prices of the big four banks, but this doesn’t tell the full story
Why have Australia’s big four banks been suffering over the past year? Is it the Royal Commission into misconduct in the financial sector, due to publish its final report after local markets close on Monday? Or is it the effect of a housing market entering a once-in-a-generation slump? While the real answer is probably a mixture of the two, it’s worth trying to pick apart the factors if you think commissioner Kenneth Hayne is set to deliver a fatal blow to one of the world’s most richly valued banking industries. The share prices of major banks move closely in line with Australia’s housing market: Westpac Banking and National Australia Bank show a correlation of 0.87 with CoreLogic index of prices in the country’s five largest state capitals, while Australia and New Zealand Banking Group (ANZ) is on 0.61 and Commonwealth Bank of Australia on 0.46 (a figure of 1 implies a perfect correlation, with 0 suggesting no relationship). Another rough way of visualising this is to assume that ...
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