May 1 (Reuters) – Australia’s biggest banks are likely to report weaker first-half profit as high operating costs and competition to sell mortgages and deposits squeeze margins, setting up a possible reversal of a stock rally that analysts said has left the sector overheated.
Traditionally beneficiaries of rising interest rates, the country’s so-called Big Four lenders have instead spent the past year sacrificing margins to write new home loans and paying more to depositors, narrowing their closely watched “net interest margin” and putting downward pressure on profit, analysts said.
That may undermine a share price run-up in the sector since late 2023 that was based on signs that 13 interest rate hikes had tamed inflation and hopes of a return to rate cuts in 2024. Some analysts now expect a longer wait for rate cuts, with some suggesting the next move could be upwards.
“We expect further margin erosion in the first half of fiscal 2024, as the sector continues to be impacted by deposit/mortgage competition and adverse deposit mix shifts,” analysts at investment and advisory firm Jarden wrote in a client note.
Source: REUTER
