Australian bank performance 'as good as it gets' as economy starts to cool

<html xmlns=""><head><title>Australian bank performance 'as good as it gets' as economy starts to cool</title></head><body>

By Scott Murdoch and Lewis Jackson

SYDNEY, Feb 8 (Reuters) -A run of strong earnings and stock market outperformance at Australia's "big four" banking giants is set to fade later in 2023, investors said, as funding costs rise while a cooling economy portends slower credit growth and more bad debt.

Commonwealth Bank of Australia (CBA) CBA.AX, ANZ Group Holdings Ltd ANZ.AX, National Australia Bank Ltd (NAB) NAB.AX and Westpac Banking Corp WBC.AX are on track to book huge profit in their current financial years as the economy booms and rising interest rates reflate margins.

The biggest of the four by market capitalisation, CBA, is forecast to grow net income 4% in its first half, Refinitiv data showed. The rest are set for mid-teens growth or higher. Reflecting that performance, financial shares outperformed the broader stock index last year, down 2.7% versus a 5.5% decline.

But investors said bank performance will soon peak as costs increase and rising unemployment translates into fewer new loans and more bad debt.

"The upcoming results (season) will be as good as it gets," said Jun Bei Liu, who manages the A$1.2 billion ($836 million) Tribeca Alpha Plus Fund.

Net income at CBA is forecast to slump to 1.3% in financial year 2024 from 6.2% forecast for the current financial year. The other three will shrink further, and go negative in the case of ANZ.

The economy is forecast to slow from mid-2023 at the same time as roughly A$350 billion in home mortgages move from fixed to variable interest rates. The central bank estimates two-thirds of fixed-rate borrowers will see mortgage payments jump at least 40%.

A weaker economy, higher rates and accelerating inflation should see credit growth halve in 2023, said ANZ economists.

The housing market is already a problem, with prices down 9% since April, showed data from CoreLogic, the quickest decline since its records began in 1980. The "big four" control three-quarters of the mortgage market where the value of new loans fell 29% last year.

Funding is also getting pricier. Over the next 17 months banks must repay A$188 billion in almost interest-free loans the central bank made during the COVID-19 pandemic.

"For the banks, they are in a period of juicy earnings but as you get into the back half of 2023 things will start to slow and earnings growth could turn negative," said DNR Capital Managing Director Jamie Nicol, whose fund has A$7 billion in assets under management.

Some investors said the worst is unlikely. Any downturn is likely to be mild and even if margin growth slows, higher interest rates should support margins at healthy levels for months.

The Reserve Bank of Australia on Tuesday raised its main policy rate by a quarter-basis point to a decade high of 3.35%, and flagged further increases.

Macquarie Group Ltd MQG.AX on Tuesday said its home loan business - the country's fifth largest - grew in its third quarter and that it expects more growth, though higher costs.

The banks will soldier through a mild downturn, said Joseph Koh, portfolio manager at the Schroder Australian Equity Long Short Fund.

"There's always that bogey man of bad debts, but that's a really left field scenario and we don't think that's the base case," said Koh.

Still, local money managers remain lukewarm while bank stocks trade at price-to-equity ratios in the teens, well above foreign peers, with J.P. Morgan analysts estimating those managers' holdings of major banks at near a nine-year low.

Retail investors make up nearly half the shareholder registry, as they are traditionally attracted to the sector because of its high and sustained dividend payout ratio.

"They're (banks) very leveraged to the economy and we're coming into a soft patch. Earnings will be challenged. They're almost trading at all time valuation highs as the economy is heading into a slowdown. It's quite unusual," Tribeca's Liu said.

Commonwealth Bank will report half-yearly earnings on Feb. 15, whereas ANZ, NAB and Westpac will issue quarterly trading updates on Feb. 9, 16 and 17, respectively.

($1 = 1.4353 Australian dollars)

Bank earnings to soar this year before falling sharply

Reporting by Scott Murdoch and Lewis Jackson; Additional reporting by Sameer Manekar and Harish Sridharan; Editing by Praveen Menon and Christopher Cushing


면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.

온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.

이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.

우리는 웹사이트에서 최고의 경험을 전해드리기 위해 쿠키를 사용하고 있습니다. 자세히 읽거나 쿠키 설정을 변경하세요.

리스크 경고: 고객님의 자본이 위험에 노출 될 수 있습니다. 레버리지 상품은 모든 분들에게 적합하지 않을수 있습니다. 당사의 리스크 공시를 참고하시기 바랍니다.