Investors increasingly priced out of the country’s largest banks – some of the most expensive in the world – are turning to smaller alternatives for cheaper exposure to the sector ahead of expected interest rate cuts.

Long the unloved peers to their larger rivals, investors have pushed the share price of small lenders like Judo Bank up over 32 per cent and Tasmania’s MyState up 14.7 per cent. Even Bendigo and Adelaide Bank outperformed the ASX, climbing 4.3 per cent this year.