If you didn’t already know it, you could have just missed the best trading opportunity in Australian history, according to at least one analyst. From the depths of the lows on Tuesday to the close of trade on Wednesday, shares of Australia’s top four banks rallied around 13 percent each.
In dollar terms, their market cap recovered $30 billion in a session and a half, or a massive $2.5 billion per hour of trading.
”I’ve never seen such a low risk trading opportunity before.” Chris Kimber Managing Director of Fat Prophets told CNBC. “There has been a hell of a lot of money made in the past few days from people who did not panic.”
But trading and investing are two very different beasts and while you could have made a lot of money in the past few days, the outlook for long-term investors isn't as lucrative.
Australia’s big four banks, Commonwealth Bank, National Australia Bank, ANZ and Westpac, depend heavily on the overseas funding markets, given their high loan-to-deposit ratios. That makes them vulnerable to another credit crunch, one reason for the selloff in the first place. But analysts are now asking if banks face another risk closer to home - slowing growth.
Consumer confidence has dropped to a 27-month low, according to the latest data from the Westpac Melbourne Institute. Housing prices are softening, retail sales are stagnant and credit growth is on the wane.
"In (the) domestic market their position is reversed completely," Paul Dowling, principal analyst at East and Partners told CNBC. "The banks here are facing a very flat, very anemic credit environment by residential lending and business lending."
Dowling believes the weakening Australian consumer has placed the big banks in an ironic position.
"They have lots of capital, lots of cash to lend, but nowhere to put it," Dowling said.
After handing down a record full year cash profit of $6.39 billion, even Ralph Norris the outgoing CEO of the Commonwealth Bank concedes this scenario is unlikely to change anytime soon.
“There's no doubt we're going to go through a period over the next few years of lower levels of loan growth, than what we saw prior to the global financial crisis,” Norris told CNBC. “That's a new reality and what we have to do as an organization is to make sure we are productive and costs are down.”
The key to the health of Australia’s banking system could be what happens to Australia’s red hot property market, which according to the IMF is amongst the most expensive in the world. Higher mortgage rates could make some buyers, who are already stretched, especially vulnerable.
"You have a housing market in the US that barely has a pulse, but in Australia it's near or at the peak,” Olivier D'Assier, Managing Director for Europe and Asia at risk analysis firm, Axioma warns. “One of the things that our clients worry about is exposure to home loans from Australian banks."
But Australia's Treasurer Wayne Swan sounded a confident note when asked about the risks in the nation's banking sector on Wednesday.
“Our banks are in great shape,” Swan told CNBC. “I talk regularly to our regulators, we have some of the strongest banks in the world, and they're not experiencing any challenges at the moment.”
Traders who are looking for a repeat performance of this week's share market action, though could be in for a disappointment. According to Chris Kimber what happened this week might just have been a once in a lifetime opportunity.
“You can never say you won’t see it again, but I’d be surprised if we saw anything like this again in a very long time.”