Franklin Resources(US:BEN) 慧甚FactSet·2025-12-03 06:29Core Viewpoint - Australian major banks are entering the November earnings season with strong momentum and high expectations, driven by robust credit growth, prudent deposit pricing strategies, and strong performance from government bonds and market sectors expected in the second half of 2025. However, analysts warn that this may indicate the peak of the current cycle, with revenue growth likely to slow in FY2026 and net interest margin pressure potentially increasing as interest rate cuts gradually take effect [2][11]. Group 1: Revenue Momentum - Loan growth remains robust among Australian major banks, particularly in the corporate and institutional lending sectors, with Westpac and NAB expected to lead in revenue performance due to better loan structures and stricter deposit pricing strategies [4]. - Consumer credit growth has exceeded expectations, with a rebound in housing loan demand offsetting weaker refinancing activity [4]. - Macquarie is anticipated to report solid half-year results due to increased market activity and strong client trading volumes, while regional banks like Bendigo & Adelaide Bank are also expected to achieve steady growth [4]. Group 2: Net Interest Margin - The net interest margin (NIM) for Australian banks is expected to remain stable or slightly increase in FY2025, supported by deposit repricing, strong performance in New Zealand operations, and a shift towards higher-yielding corporate loans [5]. - However, this resilience in NIM is not expected to last long-term, with analysts predicting downward pressure in FY2026 due to interest rate cuts, narrowing deposit spreads, and diminishing returns from loan portfolios [5][6]. Group 3: Cost and Efficiency Focus - Cost control has become a primary competitive focus as FY2026 approaches, with upcoming earnings reports reflecting restructuring costs, wage inflation, and technology investments [7]. - Market attention will shift to the credibility of cost-cutting plans announced by major banks, with ANZ's new management seen as the most aggressive in planning significant job cuts [7]. Group 4: Credit Quality - Despite macroeconomic uncertainties, asset quality remains strong, with low loan loss rates and stable delinquency rates, supported by additional provisions accumulated post-pandemic [8]. - A slight increase in provisioning expenses is expected in FY2026, but they will still be at historically low levels, with some banks likely to release provisions in FY2025 [8]. Group 5: Capital Management - Balance sheets remain robust, but the market does not expect significant capital returns in the upcoming earnings reports, with Westpac's remaining share buyback plan being a focal point [9]. - The common equity tier 1 (CET1) capital ratio is expected to remain above regulatory minimums, with NAB and CBA in relatively strong positions [9]. Group 6: Valuation Pressure - Current forward P/E ratios for Australian bank stocks range from 19 to 22 times, significantly above historical averages, reflecting strong earnings performance and market recognition of the sector's defensive attributes [10]. - However, high valuations imply that any earnings miss could lead to significant downward pressure on stock prices, with many institutional investors favoring banks like ANZ and Westpac for their cost-cutting potential [10]. Group 7: Key Dates and Focus Points - Key earnings dates and focus points for major banks include: - Westpac (WBC) on November 3: sustainability of NIM, UNITE project execution, capital outlook [12] - National Bank (NAB) on November 6: corporate loan margins, SME competition, expense guidance [12] - Macquarie (MQG) on November 7: market revenue trends, asset management profitability structure [12] - ANZ Bank (ANZ) on November 10: impact of restructuring, institutional banking performance [12] - Commonwealth Bank (CBA) on November 11: deposit margin trends, returns from loan portfolios, collective litigation provisions [12] - Bendigo & Adelaide Bank on November 11: housing loan competition, productivity improvement measures, margin management [12]