Australian bank shares rebound as analysts eye virus recovery

FILE PHOTO: The logo for the Commonwealth Bank of Australia adorns their head office in central Sydney, Australia, October 12, 2017. REUTERS/David Gray/File Photo

Shares in Australia's top banks on Wednesday staged their biggest rally since the coronavirus outbreak forced the country to shut down in March, after a broker said the sector should benefit from a faster-than-expected economic recovery.

Commonwealth Bank of Australia <CBA.AX>, Westpac Banking Corp <WBC.AX>, National Australia Bank Ltd <NAB.AX> and Australia and New Zealand Banking Group <ANZ.AX> saw their shares jump between 7% and around 10%, playing catch up to a recent recovery in the broader stock market <.AXJO>.

FILE PHOTO: A pedestrian looks at his phone as he walks past a logo for Australia's Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Gray/File Photo

Share prices in the so-called Big Four have been slow to rebound even as new infections fell and curbs were loosened, prompting UBS analysts to say they are now oversold.

"The banks ... have missed out on the broader market rally (and) we believe further catch-up is likely near term as the economy reopens," the analysts said in a research note.

The rally comes as Australia, with a much lower COVID-19 death toll than other advanced countries, has started resuming normal life barely halfway into the six-month shutdown first flagged by the government.

FILE PHOTO: The logo of National Australia Bank is displayed outside the firm's headquarters in central Sydney, Australia, Aug.4, 2017. REUTERS/David Gray/File Photo

Shares of CBA, Australia's biggest lender, jumped 7.3%, pulling up the broader market <.AXJO> to be half a percentage point higher by afternoon.

Westpac, NAB and ANZ - Australia's second, third and fourth biggest lenders - saw their stocks rise around 10% having led market falls in March when lockdown measures stopped property sales, their main business, overnight.

Westpac shares had lost 36% since late February until Wednesday's rally, nearly double the broader market decline over the same period.

FILE PHOTO: A pedestrian is reflected in the window of a branch of the Australia and New Zealand Banking Group (ANZ) in central Sydney, Australia, October 25, 2017. Picture taken October 25, 2017. REUTERS/Steven Saphore

The federal government has also discovered it vastly overestimated its emergency spending, among other signs that a severe downturn was less likely than initially feared.

"There's probably been a lot of investors that had been sitting on cash that had been reluctant to believe the rally and potentially capitulated and are just buying into the market," said DNR Capital portfolio manager Scott Kelly.

(Reporting by Byron Kaye, Paulina Duran and Swati Pandey in SYDNEY; Editing by Ana Nicolaci da Costa)