Australian Banking shares have had a stellar 12-month performance, with some benchmarks up nearly 60% we take a look to see what the best ASX bank shares may be in 2022!

Benefits of ASX Bank Shares

ASX Banking shares have long been a favourite for many generational investors and today make up a substantial portion of the ASX200 index. ASX banking shares account for nearly 20% of the market cap in the ASX200.

Understandably AUS Banking shares have been a favourite amoung investors for many reasons.

  1. Diversified exposure to financials
  2. Attractive, tax-effective income
  3. Generally DRIP Compatible
  4. Typically offer strong long term returns
  5. Offer a decent dividend yield in comparison to broader market
  6. Franking Credits typically associated with dividends

ASX Bank Shares Performance

Over the past 12-months, ASX bank shares which can be benchmarked through either the S&P/ASX 200 Financials ex A-REIT Index is up over 57.13% or through an ASX Banking ETF such as VanEcks MVB is up over 65.16% including income.

This performance has been one of the best on the record for ASX Banking shares and has actually eclipsed the ASX200 (S&P) index return of around 20%. However, just because banking shares had a stellar run-up in 2021 it doesn’t necessarily mean that the benchmark will be able to be repeated in 2022.

COVID Pandemic and Lending Restrictions

The macro conditions at the time need to be considered, Australia was coming off the back of a large amount of government stimulus which was pumped into the economy during the COVID pandemic. APRA also announced that it would let banks dip into the buffer fund to extend lending to the economy in order to provide credit to the market. This allowed for banks such as Commbank to issue record low residential loans to the market!

The banks capital buffers were at historical all time high’s leading up to the pandemic in 2019. The financial strength of these buffers allowed the banks to be able to respond to the pandemic and the volatility in the credit markets which existed at the time.

The conditions also meant that house prices continued their upward trajectory after a short loss of confidence in the markets, this meant the banks were able to generate large amounts of cash on their loan books, with many banks reporting record results in the FY2021.

The General Economic Recovery

The record results in the Australian Banking sector are largely linked to the recovery of the overall Australian economy. We have seen a fast “V-shaped recovery” across the board since the COVID pandemic.

Unemployment
  • Number of employed people and hours worked in June both above pre-COVID-19 levels
  • Various federal and state government stimulus programmes continue.
Best ASX Bank Shares
Unemployment Levels Australia
Dwelling Values
  • National dwelling values 12.4% above the previous peak achieved in April 2020
  • All geographies up over the quarter and prior year. Regional growth strong.
Best ASX Shares
Australian Dwelling Value Increase
Gross Domestic Product
  • GDP and GDP per capita up 1.1% and 0.8% respectively for the year to 31 March 2021
  • The household saving ratio of 11.6% remains well above the 1Q20 savings ratio of 7.9%.
ASX Banking Shares Australian GDP
Australian GDP

ASX Bank Shares Dividend Yields

ASX Banking shares are quite well known for paying out relatively high and stable dividend yields to their shareholders. Most banks however, chose to suspend their dividend payments during the COVID pandemic to preserve capital. However, dividends have now returned to the sector.

Currently the highest paying ASX bank share of the big-5 is ANZ bank with a yield of around 3.8%. The next highest is CBA with a 3.5% yield. Both of these banking shares have a dividend yeild higher than the broader S&P/ASX200 index with a current average of 3.2%.

Westpac and MQG are currently paying a yield which is lower than the ASX200 average.

ASX Banking ETF

One of the largest and most well regarded ASX Banking ETF is provided by VanEck partners, under the ticker code MVB.ASX. The top ten holdings currently in the portfolio are as follows:

ASX codeTicker%
COMMONWEALTH BANK OF AUSTRALIACBA AU20.33
AUSTRALIA & NEW ZEALAND BANKING GROUP LANZ AU20.15
WESTPAC BANKING CORPWBC AU19.98
NATIONAL AUSTRALIA BANK LTDNAB AU19.34
MACQUARIE GROUP LTDMQG AU17.16
BANK OF QUEENSLAND LTDBOQ AU1.62
BENDIGO & ADELAIDE BANK LTDBEN AU1.42
VanEck Partners MVB ASX ETF Holdings

Whilst the 1-year performance of the MVB.ASX ETF has been quite impressive returning around 65%, the five-year performance of the ETF has been broadly inline with the general S&P index returning around 9%. This is slightly lower than an ASX200 index such as VAS which was returned around 10.47% pa over the past five years. VAS also comes with significantly lower fee structure.

Best ASX Bank Shares 2022!

Whilst the past performance of shares is no indiciation of future performance lets take a look to see which bank shares have performed the best over the past 5-years (not accounting for dividends):

Company5-Year Return
CBA40.65%
MQG121.61%
ANZ1.45%
WBC-14.15%
NAB2.05%
Big 5 Banking Shares 5-Year Return

Out of the above group of the big 5 banking shares above surprisingly mum and dad investors may be a little dissapointed with ANZ, WBC and NAB's 5-year performance with barely positive returns over the period.

Holders in CBA and MQG have realised significicant returns over and above the S&P/ASX200 index over the same period, with the standout being MQG.

Aus Banking Shares - Prophets Take

The 1-year performance of the ASX Banking shares has been extremely impressive returning over 60%. However, it's critical to remember that past performance is not indicative of future performance. Investor's need to keep in mind the headwinds that potentially fuelled the impressive 1-year returns of the sector.

Prophet holds a significant portion of ASX banking share's through their participation in VAS which is a ASX200 ETF. We don't see any need to add further exposure to ASX banking shares at this time particualry due to the recent run up in prices across the board.

It's important to remember when investing in any ASX200 index tracking ETF you will inherently gain a large exposure to ASX banking shares.

Full List of ASX Bank Shares

A full list of ASX Bank Shares ordered by largest market capitalisation to smallest can be found below.

RankTickerNameMarket Cap
1.ASX:CBACommonwealth Bank178.23B
2.ASX:WBCWestpac Banking Corp95.24B
3.ASX:NABNational Australia Bank93.14B
4.ASX:ANZANZ Banking Group79.6B
5.ASX:BOQBank of Queensland6.22B
6.ASX:BENBendigo and Adelaide Bank Limited5.33B
7.ASX:VUKVirgin Money UK PLC3.32B
8.ASX:BFLBSP Financial Group Limited2.36B
9.ASX:LFGLiberty Financial Group2.07B
10.ASX:HGHHeartland Group Holdings1.3B
11.ASX:PPMPepper Money Limited1.08B
12.ASX:GMAGenworth Mortgage Insurance924.03M
13.ASX:RMCResimac Group Limited784.88M
14.ASX:AFGAustralian Finance Group Ltd742.8M
15.ASX:MYSMyState Limited514.85M
16.ASX:ABAAuswide Bank Ltd284.41M
17.ASX:KSLKina Securities Limited255.37M
18.ASX:BBCBNK Banking Corporation Limited103.7M
19.ASX:YBRYellow Brick Road28.56M
20.ASX:N1HN1 Holdings Limited8.16M
21.ASX:CCBChina Construction Bank CorporationN/A
22.ASX:JDBJudo BankN/A
Full List of ASX Bank Shares
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