ANZ shares hit a record high on Tuesday, creeping ever closer to the sharemarket's exclusive $100 billion club as the financial sector continues its stellar run this year.
ANZ's market capitalisation now sits at $88.2 billion, making it the fourth most valuable stock on the local market. If it were to make the leap above $100 billion it would join BHP, Commonwealth Bank and Westpac as only the fourth listed company to join the exclusive club.
Rising 0.3 per cent for the day to close at $32.23, the bank's stock has surged 28.7 per cent in 2013. The latest gains come even as questions are being asked about returns from its Asian strategy.
ANZ is enjoying a flood of funds being ploughed into the bank sector, with investors taking a shine to the high yields and steady gains among the big banks.
Across the board, banking stocks are pushing record highs, pulling the entire local index up with them. The big four banks make up 30 per cent of the benchmark S&P/ASX 200.
The financials sector has surged more than 25 per cent in 2013, outperforming the S&P/ASX 200, which is up 15 per cent in the same period. But analysts say the dream run for bank stocks could soon be over, with key players looking increasingly expensive and the upside to bank stocks may be running out.
Analysts say the key risks for the banking sector include slow loan growth and increases in cost of funding.
But more bullish investors believe wholesale funding is likely to get cheaper - helping to fatten profit margins - and business lending is likely to rebound.
The financials sector is currently trading at a forward price-to-earnings ratio of about 14.5 times, running ahead of the broader industrials market.
The fragility of bank stocks was on display earlier this year when US Federal Reserve chairman Ben Bernanke announced the central bank would begin tapering soon, which was quickly followed by a 12.3 per cent fall in the financial stocks index. While their stock prices have recovered somewhat, the air of invincibility is gone.
"The banks have now delivered 50 per cent total return over the last 15 months since [European Central Bank president] Mario Draghi stated "whatever it takes" [to save the euro] and the Fed initiated QE3," UBS analyst Jonathan Mott said. "Combined with RBA rate cuts, this has driven the sector to historically high multiples," he said.
Westpac has soared more than 31 per cent this year to close at $34.11 on Tuesday, bringing it within a whisker of the all-time high of $34.68 it hit in May.
CBA, Australia's biggest bank, ended just 24¢ shy of its record high of $75.00, hit in August, and has added more than 20 per cent in the year to date.
Rounding out the big banks, NAB shares rose to five-year highs, jumping a healthy 44 per cent in 2013 to $36.07.
Bank of Queensland and Macquarie were both at multi-year highs, with rises of 62 per cent and 44 per cent respectively.
"Although conditions for the Aussie banks remain subdued, strong corporate balance sheets and hard asset price inflation provides earnings protection near term and is driving return on assets towards peak cycle levels," Mr Mott said.
"In this environment, earnings risk for the banks appears lower than many other sectors. Short of more monetary or quantitative stimulus it is difficult to build an upside case for banks from these levels."