The banking industry in Australia is similar to the Canadian banking industry in many ways. For example, the market in Canada is dominated by five large banks whereas four Australian banks are the big players in the domestic market.
The four large banks in Australia are Australia & New Zealand Banking Group Limited (ANZBY), Commonwealth Bank of Australia (CMWAY), National Australia Bank Limited (NABZY) and Westpac Banking Corporation (WBK).Concerns about the economic slowdown in China and the fears of bubble in the Australian real estate market have adversely impacted the share prices of the four Aussia banks recently with prices declines of one-third or more from the peak.
Australian banks are big lenders to households rather than corporations. Within household lending, the majority of the lending is dominated by mortgages for owner-occupied and investment properties as shown in the chart below. Hence equity investors are rightly worried about the impact of a real estate crash on the banks.
Click to enlarge
The chart below shows the market share of lending to households. Since 2002, the four big banks have consistently increased their lending to the household sector.
Source: Competition in Financial Services – Research Report, Aug 2015, Centre for International Finance and Regulation
Disclosure: Long NABZY and WBK