The wave of negative sentiment engulfing Australian banks shows little sign of abating, with another day of heavy selling driven by fears of mounting bad debts and a generally poor outlook in global banking.

The banks' share values have slumped between 9 and 16 per cent since the start of the year and 20 to 34 per cent over the past 12 months.

ANZ has led the big four down, having raised its forecast for loan losses twice this year, including last week's $100 million increase in bad debt provisions due to exposures to troubled players in the resource sectors.

Morgan Stanley bank analyst Richard Wiles said the commentary from the major banks supported the view that impairment charges are rising from bottom-of-the-cycle levels.

"We expect pockets of weakness, emerging single name exposures, and a softer economic environment to drive higher loan losses in the second half of 2016 and into 2017," Mr Wiles wrote in a note to clients.

The major banks have lost as much as a third of their value over the past year. ( Bloomberg )

Westpac joined ANZ last week in warning loan losses were on the rise, saying its consumer bank business faced an increase in bad debt provisioning of around 10 per cent, reflecting "pockets of stress" in the resource states of Western Australia and Queensland.

Mr Wiles said the ANZ update in February highlighted "more difficult" credit conditions in Asia, while last week's announcement reflected "the evolving position with a small number of Australian and multi-national resources related exposures".

"We're concerned that ANZ's Asian institutional bank loan loss cycle could get even worse given the strong growth in its loan portfolio over the past few years," he said.

Macquarie's bank analyst team noted the rapid deterioration in ANZ's bad debts.

"Although ANZ has highlighted that the overall credit environment remains broadly stable, it is concerning that the guidance has changed in such a short time," it observed.

Big four's exposure to potential bad corporate debts

Potential bad business debts ANZ CBA NAB Westpac Known problem companies $245m $300m $337m $368m Companies with deteriorated credit $1,144m $1,051m $627m $463m Total $1,389m $1,351m $964m $831m

Source: Loanconnector, Dealogic, Macquarie Research (March 2016)

However, Macquarie said in terms of known potential problem exposures which have been in the press frequently in recent times, such as collapsed electronics retailer Dick Smith and struggling law firm Slater and Gordon, ANZ has the smallest exposure.

"However, ANZ and Commonwealth Bank have an overweight position to energy and mining companies which has seen their credit quality deteriorate in recent periods," Macquarie added.

"Westpac has the smallest exposure, while NAB's exposure is also relatively small and is more skewed towards the larger companies in the mining sector."

US bank downgrades also hurting

The local sentiment has not been helped with another spate of earnings downgrades for US and European banks, signalling tougher times globally.

FactSheet Research said, so far this year, the financials sector in the US has recorded its third largest quarterly decrease in earnings expectations, with nearly a third of the businesses seeing their earnings per share forecasts cut by more than 10 per cent.

Weighing most heavily on the US earnings downgrades are Wall Street giants Bank of America, down 40 per cent, Citigroup, down 21 per cent, and JP Morgan, down 17 per cent, which has seen US financial stocks fall around 6 per cent since the start of the year.

Peninsula Capital director Richard Campbell said the gloom around the banks needs to be seen in the broader context of constrained global growth as China and Europe struggle with debt and with the growing belief that the central banks have run out of ammunition.

"Negative rates are a deadening tool as they undermine bank profitability and don't necessarily encourage investment," Mr Campbell said.

Mr Campbell said the possibility of another round of cuts in official rates from the Reserve Bank was weighing on local sentiment.

"This would squeeze banks as they will have difficult holding deposits if they offer savers minimal income," Mr Campbell said.