A weaker-than-expected profit from ANZ and its $3 billion capital raising have sparked a massive selloff of shares in the banking sector.
ANZ's cash profit rose to $5.4 billion in the nine months to June 30, putting it on track for a record $7.2 billion annual profit.
But the nine-month windfall fell short of market expectations.
"The fact that they are two to three per cent under what the market was expecting, the reaction to that has been pretty savage," IG market strategist Evan Lucas said.
"That has hit the other banks pretty hard, because this is a shock to see ANZ's revenue and cash net profit a lot further under than what was expected."
ANZ also said its provisions for bad and doubtful debts had increased, partly due to stress in the resources and agriculture sectors.
"That's a concern and the inferred meaning is if ANZ is feeling it, they are all going to feel something," Mr Lucas said.
ANZ's profit update came as it launched a $3 billion capital raising to help meet new rules from regulators to provide an extra buffer for banks' home loan books.
ANZ will issue up to $2.5 billion of new shares to institutional investors at a discounted price, while ordinary shareholders will be tapped for up to $500 million via a share purchase plan.
The move will dilute the value of existing ANZ shares, and has heightened expectations of a similar move from Australia's largest bank, the Commonwealth, which reports its annual results on Tuesday.
Rival National Australia Bank raised $5.5 billion with a share entitlement offer in May, and Westpac recently issued capital notes and sold down its stake in BT Investment Management.
"CBA clearly is the one the market is waiting for, and we will probably find out what they are going to do on Tuesday," Mr Lucas said.
"There is still a theory and belief that they're going to have do a few bits and pieces elsewhere to get them up to what needs to be raised in regard to the new APRA rules."
CBA shares closed $2.82, or 3.2 per cent, lower at $84.55 while Westpac lost $1.05, or 3.04 per cent, to $33.44 and NAB dropped 75 cents, or 2.2 per cent, to $33.59.
ANZ shares have been halted from trade while it carries out its institutional share placement.
Chief financial officer Shayne Elliott said a share placement provided more certainty for shareholders than other capital improvement methods, such as consecutive underwritten dividend reinvestment plans.
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