ANZ [ASX: ANZ] shares were down by 2.7% early this morning.
This was the worst performance out of the Big Four banks. Though last week, conversely, ANZ was the best.
It’s possible the drop this morning is merely a case of catch-up, as there are several external forces rattling the banking sector in general.
What caused the drop?
There have been signs that weak home auctions recently could be signaling the start of weak home loan growth ahead. The value of investor loans fell by almost $1 billion over the month, and over the year investor lending has decreased by more than 14 %.
Also, APRA has demanded tougher credit rules.
To top it all off, the Royal Commission into banking is still going on in the background, with an aim to come down hard on lax lending practices.
Any recommendations from the commission could significantly hamper profits.
What’s next for ANZ?
According to ANZ’s Daniel Gradwell, investor activity is likely to stay weak for now.
‘It’s hard to see a reacceleration in the investor segment with sentiment clearly subdued,’ he commented.
However, he did note that recent decisions by several banks to cut investor mortgage rates, could prevent another sharp drop in borrowing. And the procedural changes influenced by APRA could mean that banks may just need a period of time to adjust.
Considering the current volatility, it could pay to remain patient while the market stabilises.
Vigilant investors will keep an eye on any new developments in the coming months.
For Money Morning
PS: The growing Chinese middle class could translate into a massive investment opportunity for Australians. Money Morning editors Sam Volkering and Harje Ronngard have prepared a free report explaining how you could profit from China’s new boom. Download your free report ‘China’s New Boom’, now.