Some $50 billion has been wiped off the combined market value of Australia's major banks since their highs at the start of this month, as investors eye a more challenging outlook for the big four.
After a stellar run in the sector between late 2016 and April, the stock prices of Commonwealth Bank, Westpac, ANZ Bank and National Australia Bank have taken a hit in recent weeks from an underwhelming reporting season, weakening housing market, and the budget's bank levy.
Such is the size of the big four, which make up about a quarter of the ASX 200, that the reversal may drag on overall market returns, and potentially short-term performance of superannuation funds.
Adam Gee, chief executive of SuperRatings said the bank slump would likely have an impact on retirement savings.
"The banks are in the firing line of pretty much everyone at the moment," he said.
"If the banks drop 5 per cent that that will have an impact on overall returns."
From its 2017 peak on May 1, the ASX 200 banks index has fallen 9.9 per cent, and shares in ANZ Bank, Westpac and National Australia Bank have each fallen 10 per cent or more, known as a "correction" in financial market jargon.
CBA is down 8.5 per cent from its May high.
The combined loss in market capitalisation among the big four since May 1 is $50.6 billion, according to Bloomberg data.
The slump followed a surge in bank shares that started in late 2016, so that over the last year the picture is rosier for bank investors. CBA's share price is still up compared with this time last year, for instance.
Even so, the slide highlights the tougher earnings outlook facing the big four as credit growth slows and banks face higher capital requirements and higher tax costs.
UBS equity strategist David Cassidy said banks had already started to look expensive before the latest round of results from ANZ Bank, National Australia Bank and Wespac earlier this month.
The underwhelming profit results, followed by the surprise $6.2 billion tax in the budget, had contributed to the sell-off since then.
"They were coming off pre-budget on the back of results not being terrible, but nothing to write home about, and then we had the bank levy on top of that," Mr Cassidy said.
Bell Potter analysts said the Australian banks' share prices had also benefited last year from the "Trump trade", where investors were betting on stronger global growth and rising interest rates.
"It all started when Trump got in, and that's now unwinding," Mr Lim said.
A note from Mr Cassidy earlier this month said that over the last two decades, Australian banks had produced higher returns compared with both the Australian market and banks overseas. However, he is relatively cautious about the outlook from here, in part because of the softer environment facing the banks.
"I would have to think part of the reason the market can't do as well is that banks won't be able to do as well," he said.
Banks have led sharemarket falls, with the financial sector down 8.69 per cent since the start of May.
According to SuperRatings, which conducts research into the super market, the majority of funds have about 5 per cent overall exposure to the banks through a 25-30 per cent exposure in Australian shares.
"Certainly there's going to be a reasonable impact on the majority of super funds, as they hold every one of those banks in reasonably large proportions," Mr Gee said.
Sally Loane, chief executive of the Financial Services Council, which represents the bank-owned super funds, told a conference in Sydney this week that she hoped the impact of the levy on super returns would be limited.
"We, like everyone else with a super funds invested in the banks, watched value wiped off those stocks as the story leaked out on the eve of the budget. Hopefully this will be short-term," she said.
SuperRatings estimates the average balanced super fund has taken a 0.5 per cent hit for the month to date. This would take the returns for the financial year to date from 9.9 per cent at the end of April to 9.4 per cent at May 18.
Global sharemarkets took a tumble this week amid concerns over the presidency of US President Donald Trump in the wake of controversy surrounding sacked FBI director James Comey.
This was after banking stocks took an almost $14 billion tumble the day before the Australian federal budget in anticipation of a new bank levy, and following underwhelming earnings results in March.
Commonwealth reported a third-quarter unaudited cash profit of $2.4 billion, up 4.3 per cent.
That result followed interim results from Westpac Banking Corp, Australia and New Zealand Banking Group and National Australia Bank which saw the three banks post combined profits of $15.7 billion for the half.
