What percentage of retail investors hold Australia’s big 4 banks?

A new research note from Morgan Stanley published on Monday showed retail investors are increasingly buying Westpac Banking Corporation (ASX: WBC) shares, while selling off Commonwealth (ASX: CBA) shares. 

Retail investors in Australia account for approximately 48% of major banks’ shares on average, with CBA and WBC being majority retail by one percentage point on a first-past-the-post basis. 

As at late 2022, Westpac and Commonwealth both had a majority retail investor holding at 51%.

The time-frames considered by analysts authoring the note range from 2007 to 2022. 

Significant increase for WBC 

Looking back at the latest data Morgan Stanley provided for June 2017, the decline in retail share for Commonwealth is slight, but the gain for Westpac is notable. 

In June 2017, Westpac’s retail investor share was 46%. That has since climbed five percentage points to 51% in December 2022. 

“Retail shareholders accounted for ~50% of WBC's register at the end of 2010, but this had fallen to ~46% by mid 2017. However, there has been a meaningful shift back to ~51% at the end of 2022,” analysts wrote. 

Commonwealth, meanwhile, declined from 53% to 51% over the same timeframe. 

As at December 2022, ANZ’s (ASX: ANZ) retail holding is 44% while National Australia Bank’s (ASX: NAB) is at 42%. 

So, who does retail hold the most of? 

As at December, retail investor holding of each of the big four banks is as follows in descending order: 

• CBA: 51% vs. 53% in June 2017 (-2ppt) 

• WBC: 51% vs. 46% in June 2017 (+5ppt) 

• ANZ: 44% vs. 42% in June 2017 (-2ppt) 

• NAB: 42% vs. 46% in June 2017 (-6ppt) 

What about domestic institutional? 

Looking at Australian-based institutional investors, the December 2022 makeup for each of the ‘big four’ is as follows. 

• ANZ: 27% vs. 31% in June 2017 (-4ppt) 

• CBA: 26% flat with 26% in June 2017 (no change)

• NAB: 32% vs. 30% in June 2017 (+2ppt) 

• WBC: 26% vs. 30% in June 2017 (-4ppt) 

“Domestic institutional representation on the [Commonwealth] register remains light, but there has been a gradual shift upwards in offshore ownership (Jun 2007: ~16%; Jun 2012: ~18%: Jun 2017: ~21%; Dec 2022: ~22%), which we attribute to index and pension funds,” analysts wrote of Commonwealth Bank.

As for NAB, “NAB's retail representation peaked at aprox. 48% in December 2018, but has fallen back to approx. 42% as both domestic and offshore institutional investors have increased by 3ppt.” 

A look at offshore institutional

As for offshore instos, late December reads reflect the following: 

• ANZ: 29% vs. 27% in June 2017 (+2ppt) 

• CBA: 22% vs. 21% in June 2017 (+1ppt) 

• NAB: 26% vs. 23% in June 2017 (+3ppt) 

• WBC: 24% flat with 24% in June 2017 (no change) 

Implications and considerations 

Retail investors often perceive safety in holding the banks. 

An unrelated note from Citi published on Monday highlighted the 1HFY23 earnings season is now showing a skew towards the downside with earnings misses a defining feature. 

That comes as last week’s surprise US Personal Consumption Expenditures (PCE) inflation read was higher than forecast (0.6% actual vs 0.4% forecast), reiterating the probability that the Fed, and RBA, will continue hiking interest rates. 

In the context of an uncertain economy (and therefore an uncertain share market), it’s not surprising to see the overall number of retail investors holding the banks on the rise.

A look at Westpac's one year performance chart vs. the ASX200 adds further context to its +5ppt retail shareholding increase on June 2017 levels