The Commonwealth Bank of Australia (ASX: CBA) share price is trading lower on Wednesday.

In afternoon trade the banking giant’s shares are down 0.65% to $71.73.

Why is the CBA share price in the red?

This decline appears to have been caused by a spot of profit taking in the banking sector today after some stellar gains over the last three weeks.

Prior to today, the CBA share price was up 21% over the previous three weeks.

This actually made it the laggard in the group, with the other big four banks recording even stronger gains over the same period. Though, given how much harder their shares have fallen during the pandemic, this isn’t particularly surprising.

Is anything else weighing on CBA’s shares?

Also potentially weighing on the bank’s shares today was news that Slater & Gordon Limited (ASX: SGH) has filed a class action in the Federal Court.

This class action relates to consumer credit insurance (CCI) for credit cards and personal loans that was sold between 1 January 2010 and 7 March 2018.

The bank has advised that it is reviewing the claim and will update the market when appropriate.

What is the class action?

This class action is similar to one that Slater & Gordon filed against National Australia Bank Ltd (ASX: NAB) for the sale of CCI. That case was recently settled for $49.5 million.

Slater & Gordon commented: “The CBA class action is part of a series of cases following the Banking Royal Commission, which heard that banks were using pressure tactics to sell unnecessary CCI products to customers who were ineligible to claim under the policies. It is the fourth class action Slater and Gordon have issued in relation to CCI products.”

The law firm notes that CBA previously identified that many customers had been sold policies that they were ineligible to claim upon, making them worthless. And while the bank provided refunds to some of their customers, Slater and Gordon believes the remediation program did not adequately compensate customers.

More reading

• Leading brokers name 3 ASX 200 shares to sell today
• Are Aussies still withdrawing cash like crazy?
• How to be like Warren Buffett and not lose money investing in ASX 200 shares
• Afterpay share price overbought says analyst
• Why the CBA share price is lagging its big four cohorts

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price looks set to end its positive run on Wednesday.

In afternoon trade the banking giant’s shares are down 1.5% to $20.69.

This follows an impressive 36% gain for the ANZ share price in the prior three weeks.

Why is the ANZ share price dropping lower today?

Investors have been selling the bank’s shares after analysts at Goldman Sachs called time on its impressive rally.

According to the note, the broker has downgraded ANZ’s shares from a buy rating to neutral and placed a price target of $20.02 on them.

The broker made the move on valuation grounds after its strong share price gain meant there was virtually no upside for shareholders over the next 12 months including dividends.

Goldman commented: “ANZ only offers 1% TSR, which sits towards the bottom of our Australian retail bank stack, and so we move to Neutral. Since we added ANZ to our Buy List on 22 March 2020, ANZ is up 31% versus the ASX-200 Accumulated Index up 25%; the ASX-200 Bank Accumulated Index up 19% and ASX 200 Index up 28%.”

Though, the broker has suggested there is scope for it to lift its price target in the future if three factors play out favourably.

The broker added: “We would become more constructive on ANZ if (i) it can achieve its A$8bn cost base target by FY22E (not currently reflected in GSe/Consensus forecasts), (ii) better-than-expected repricing of its institutional lending portfolio, and (iii) there is a quicker-than-expected recovery in housing volume momentum.”

But until that happens, it will be focusing on other banks. This includes Bank of Queensland Limited (ASX: BOQ), which it upgraded to a buy rating today.

It notes that the regional bank is trading at a significant discount to its peers based on historical multiples.

Goldman has placed a $7.17 price target on Bank of Queensland’s shares. This represents potential upside of approximately 12% including dividends.

More reading

• These ASX bank stocks just got upgraded by top brokers to “buy” – and they aren’t the big four
• ASX 200 up 0.45%: Harvey Norman declares special dividend, gold miners race higher
• Are Aussies still withdrawing cash like crazy?
• Why the CBA share price is lagging its big four cohorts
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The bulls refuse to take any sell-off lying down! The S&P/ASX 200 Index (Index:^AXJO) rebounded from its morning sell-off triggered by a weak lead from Wall Street, but eager bargain hunters soon turned the market around.

The top 200 benchmark fell nearly 1% in the first 15 minutes of trade but clawed back to be 0.5% in the black during lunch time trade.

However, the big banks remain under pressure after their big rally pushed them closer to fair value. If you are looking for attractive buys, you may need to look at their smaller rivals as brokers just upgraded three of them to “buy”.

Improving margin

One stock that got moved to the “buy” list is Bendigo and Adelaide Bank Ltd (ASX: BEN).

JP Morgan changed its recommendation on the regional bank to “overweight” from “neutral” today as it believes that the market isn’t fully appreciating the upside.

“With COVID-19 infection rates under control in Australia and lockdown rules easing, there is increased optimism that the Jun-20 quarter trough in the economy will not be as bad as first thought,” said the broker.

“Recent data have pointed to improvements in term deposit spreads. This is likely to continue.”

JP Morgan’s price target on Bendigo Bank is $8.10 a share.

Cum-upgrade cycle

Another bank stock that is under appreciated by the market is the Bank of Queensland Limited (ASX: BOQ) share price.

Goldman Sachs also upgraded its call on BOQ to “buy” from “neutral” as it believes consensus earnings forecasts are too conservative.

“We now have more confidence that BOQ will be able to reach its management target of broadly flat 2H20E NIMs [net interest margins], and sit c.8% above Bloomberg FY21E consensus,” said the broker.

Goldman Sachs increased its price target on the stock to $7.17 from $5.51 a share.

Small cap bank buy

Coincidentally, another Queensland-based bank also got upgraded by Bell Potter to “buy” from “hold”. This is small cap lender Auswide Bank Ltd (ASX: ABA).

Auswide is Australia’s newest bank as it mothed from its previous form as a credit union called Wide Bay Australia.

The broker believes that if the re-rating were to be applied to Auswide, fair value for the stock would increase by 17% to $5.15 a share.

A re-rating is when the implied discount rate on a sector’s valuation is lowered due to higher investor confidence.

Further, Auswide is also sitting on a reasonable forecast yield of 4.5% even after Bell Potter cut its forecast final dividend by 53%.

More reading

• 2 crazy cheap ASX 200 shares you could still buy
• ANZ share price drops lower after Goldman Sachs downgrade
• Does the ASX 200 just follow the US markets?
• ASX 200 up 0.45%: Harvey Norman declares special dividend, gold miners race higher
• Why you can’t afford not to invest in ASX 200 shares in 2020

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post These ASX bank stocks just got upgraded by top brokers to “buy” – and they aren’t the big four appeared first on Motley Fool Australia.

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