The big four bank stocks make up a foundational piece of many investors' portfolios.
They also dominate the S&P/ASX 200 Index (ASX: XJO) in terms of market share.
Combined, they make up almost a quarter of Australia's benchmark index.
This means when the big four bank stocks underperform, they have a large impact on many ASX ETFs that track the domestic market.
This is exactly what has happened so far in 2026.
These disappointing results have heavily contributed to the underperformance of the broader ASX 200, which is flat year to date.
Several factors have contributed to these poor returns.
Firstly, the big four bank stocks came into 2026 with stretched valuations after strong growth in the prior year.
Additionally, sentiment has shifted to viewing high interest rates as poor for the housing market as mortgage growth deteriorates.
The big four control more than 70% of Australia's mortgage market, so weaker housing activity hits the sector disproportionately.
Home-loan applications have fallen roughly 12–20% across the majors, according to Reuters.
In short, the market is no longer paying the same premium for bank earnings when it sees slower mortgage growth, intense lending competition and rising credit-risk provisions ahead.
With three of the big four bank stocks losing ground in 2026, investors might be looking to buy the dip.
The latest outlook from experts paints a mixed picture for the next 6-12 months.
On the positive side, UBS recently reaffirmed its buy rating on Westpac shares with a 12-month target of $45.
With Westpac shares currently trading for just under $35 per share, this indicates almost 30% upside.
It also offers a competitive yield across the big four.
On ANZ shares, Citi has a buy rating with a $39.25 target.
This indicates limited upside from its current price hovering around $38.
CBA shares still appear overpriced according to Shaw and Partners' James Bills, who recently had a sell rating on Australia's largest bank.
NAB is also receiving poor outlooks from brokers, with Catapult Wealth's Dylan Evans recently issuing a sell recommendation on the big four bank stock.