Are ASX bank shares a buy in September?

It’s been a rough month for S&P/ASX 200 Index (ASX: XJO) bank shares, with declines across the board reversing many gains made earlier this year.

It looks like investor sentiment has turned negative amid concerns about falling mortgage demand, a weakening housing market, and tight competition squeezing margins.

It didn’t help that inflation data came in higher than expected in August, sending major banks into a tailspin. Recent July inflation data showed underlying inflation remained at 3.6%, above the Reserve Bank’s 2% to 3% target. The update has prompted several major banks to forecast another hike as early as September.

What happened to the ASX 200 big four major banks in August?

Australia’s banking sector is dominated by the big four banks: Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), and ANZ Group Holdings Ltd (ASX: ANZ).  

Together, they make up around a quarter of the ASX 200 Index by market capitalisation. 

There was a flurry of results announcements from the ASX major banks this month, which didn’t exactly instil confidence.

CBA reported a record cash profit, while NAB, Westpac and ANZ also delivered resilient quarterly earnings. However, all four majors showed signs of weaker mortgage demand.

At the time of writing, with only a couple more trading days left of the month, CBA shares are changing hands at $155.68 a piece. The ASX 200 major bank’s shares have fallen around 12% in August. 

NAB shares are trending lower at the time of writing, down around 8% over the month to $38.06 per share.

ANZ shares are down around 2% for the month of August and are changing hands at $36.54 per share at the time of writing.

Meanwhile, Westpac shares are trading for $33.83 each, having fallen around 11% throughout the month.

What about the mid-tier banks?

It’s more of the same for ASX 200 mid-tier banks too.

Bendigo and Adelaide Bank Ltd (ASX: BEN) fell around 8% to $10.50, at the time of writing.

Bank of Queensland Ltd (ASX: BOQ) shares have fallen a slightly lesser 4% to a current trading price of $6.38 each. 

While Macquarie Group Ltd (ASX: MQG) shares suffered the least, they are still in the red for the month, at the time of writing. The ASX bank shares are down around 1% for the month and trade at $251.59 per share.

Brokers are also neutral on Bendigo Bank shares. TradingView data shows that the majority have a hold rating, but again, the $10.33 average target price implies a potential 2% downside at the time of writing.

And which ones have a sell recommendation?

Then there are the ASX bank shares that brokers are most bearish on.

CBA shares still the least favoured ASX bank stock. TradingView data shows the majority have a strong sell rating on the banking giant’s shares. The latest $127.86 target price implies a potential 18% downside ahead for investors, at the time of writing. 

The majority also have a sell rating on Westpac shares. The latest $33.38 average target price now implies a potential 1% downside, according to TradingView data.

BOQ shares are also expected to keep falling. Most brokers rate the ASX bank as a sell, and the $6.09 average target price on TradingView now implies around a 5% downside ahead.