At time of writing, Commonwealth Bank of Australia [ASX:CBA] is up 1%, trading at $66.49.
This marks a modest reversal on what has become a worrying downward trend line for the stock for the past year.
Have the Big Four banks turned a corner?
We are now almost into the 11th month of the royal commission and profits have been tipped to slide further.
Combined 2018 profits for the Big Four are forecasted to be 7% lower this year compared to last.
This is in part a reflection of the impact of royal commission, but there is another factor involved — namely wholesale funding cost pressures.
In essence, money is becoming more expensive and harder to come by for the major banks.
As a result, these softer earnings may continue for a while yet — especially if a serious credit crunch comes to pass.
Will there be further hits to bank share prices?
The big four banks have set aside hundreds of millions of dollars to clean up the mess they have made.
However, the major domestic risk is the falling housing market.
As quoted by the ABC, UBS senior bank analyst Jonathon Mott notes,
‘The risk of the current “credit squeeze” turning into a “credit crunch” is real and is rising, with the housing market now falling sharply.’
It seems like the likelihood of an Australian financial could be growing.
Could this kind of fall be around the corner?
Only time will tell.
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