Team Switzer has spoken before about the whopping prices commanded by bank shares in Australia right now. Shares in banks like CommBank and Westpac are seemingly acting as a safe(r) haven for investors while they ride out the Trump tariff storm. But how long will the banks stay safe as houses?

Trump has driven Australian banks to record highs

When returning US President Donald Trump celebrated his so-called “Liberation Day” by implementing sweeping global tariffs, he sent global markets spiralling. 

After a few days of pain, many Australian retail and institutional investors fled their positions and - if they stayed in the market - piled into bank stocks, perceiving them to be 'less risky' overall. 

Value soon began to climb as these securities grew in popularity. CommBank (ASX:CBA), for example, yo-yo'd from $156.37 down to $144.41 following Trump's "Liberation Day" announcements, before quickly climbing up to almost $170 per share.

That's not just a 52-week high for the bank's stock. That's a new record high for the stock since it first debuted on the ASX over 25 years ago. 

Similarly, Westpac (ASX:WBC) saw big growth, unlike anything it has experienced in the last decade. Its price swelled from just over $29/share to almost $33.50 per share in the fortnight following “Liberation Day”. ANZ and NAB share a similar story, although neither can claim all-time records quite like CBA can.

But the curtain has been lifted somewhat since Westpac reported its results to the market this week. The bank left investors with positive results including a 5% growth in its mortgage book and a 14% rise in business lending, but still not quite what was expected. 

It then warned of more rough seas ahead: slowing credit growth, rising costs and geopolitical risks are all set to play their part in future results.

And yet, the bank still commands a hefty premium on its stock compared to pre-Liberation Day prices. 

Safe today, slump tomorrow?

On this week’s Switzer Investing TV, guest host Paul Rickard spoke to experts about Westpac’s results after the market reacted to its lacklustre results.

“Investors are looking for any safe haven…right now in the markets,” she said, adding that investors like them in tough times because banks are more “heavily scrutinised” in Australia. “There’s no way that they’re ever going to go under.”

But investors shouldn’t park there too long, according to Chris Haynes, Head of Equities at Equity Trustees, lest they risk letting their value decay in the name of perceived psychological safety. Banks are under pressure to deliver at a tough time for their margins, Haynes said.

“We’ve had this flight to the banks in recent times thinking they’re perfectly safe… but the margin pressure is real” he said adding that investors are buying “the best house in the street and don’t care what they pay for it”.

Perfect conditions have aligned to deliver some positive headlines for Haynes. He highlighted that rising rates are actually boosting margins, bad debts are at record lows and the bank’s liquidity is currently high. 

But with the good comes the bad, adding that it’s now all about the margin squeeze: “I think we may have just seen a little bit of a turning point in this result for all banks. There’ll be no earnings growth going forward…you’re paying a lot for nothing.”

With other banks set to report their results this week, our panel is looking for value amid these spiralling prices. Grady Wulff threw out the challenge, saying that "I want to see CBA justify [its] share price. A 29 times PE is very, very high for our big banks".

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