The Australian sharemarket is on track to record its worst performance during an earnings season in two years after major bank stocks were punished for failing to meet sky-high expectations.

The benchmark S&P/ASX 200 Index has dropped 1.9 per cent this month, which is already the biggest decline since February 2023, a month when companies typically provide profit updates. This month last year, the gauge was up 0.2 per cent as bank stocks drove the bourse to record-breaking levels.