{"id":135252,"date":"2023-11-10T18:19:11","date_gmt":"2023-11-10T18:19:11","guid":{"rendered":"https:\/\/allmybiznews.com\/?p=135252"},"modified":"2023-11-10T18:19:11","modified_gmt":"2023-11-10T18:19:11","slug":"bank-profits-past-their-peak-as-mortgage-war-takes-toll","status":"publish","type":"post","link":"https:\/\/allmybiznews.com\/markets\/bank-profits-past-their-peak-as-mortgage-war-takes-toll\/","title":{"rendered":"Bank profits past their peak as mortgage war takes toll"},"content":{"rendered":"

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Bank profits have peaked and are set to come under further pressure from stiff competition in home loans, investors say, as the market prepares for updates from two key protagonists in the mortgage war: ANZ Bank and Commonwealth Bank.<\/p>\n

After results this week from Westpac and National Australia Bank showed profits fell in the September half, analysts and investors say the fierce competition in mortgages is likely to continue weighing on banks\u2019 revenue in the year ahead.<\/p>\n

<\/p>\n

The market believes the big banks\u2019 profits have peaked, amid mortgage competition and rising costs.<\/span>Credit: <\/span>Louie Douvis<\/cite><\/p>\n

Even though the economy is in better shape than feared, investors say the combination of rising costs, competition and slowing credit growth will hit profits in 2024, with analysts forecasting bank profits to fall by about 10 per cent or more next year.<\/p>\n

\u201cI think most of them [banks] are looking at double-digit declines in earnings next year. So the profits have peaked,\u201d said Tribeca Investment Partners portfolio manager Jun Bei Liu. \u201cIt doesn\u2019t look great for their earnings for the next couple of years.\u201d<\/p>\n

Macquarie analyst Victor German said declining profits were \u201cthe key issue for the sector\u201d in 2024, and he has forecast NAB and Westpac will cut dividends.<\/p>\n

\u201cWe felt that NAB\u2019s CEO summarised the outlook for bank sector earnings well: the profitability uplift in financial year 2023 was a \u2018blip\u2019,\u201d German said.<\/p>\n

While other analysts believe banks can sustain their dividends, bank-watchers generally agree that the fierce competition in home lending will continue, giving customers a good chance to renegotiate a sharp interest rate, but squeezing industry profits.<\/p>\n

Just how aggressive this competition is could be heavily influenced by Commonwealth Bank, which will provide a quarterly trading update on Tuesday.<\/p>\n

CBA\u2019s home loan portfolio has shrunk for three months in a row, after it stopped paying $2000 cashbacks to new customers in June, and analysts are awaiting to see how it will respond.<\/p>\n

Barrenjoey analyst Jonathan Mott said: \u201cIf it decides to re-engage in the market with price, this is likely to result in further competition entering the market.\u201d<\/p>\n

At the other end of the spectrum, ANZ, which reports its full-year results on Monday, has posted the fastest growth in mortgages of the big four banks in the past year as it looks to expand its share, which is the smallest of the majors.<\/p>\n

NAB and Westpac this week signalled that the battle to retain customers who were coming off fixed-rate loans remained intense \u2013 though their bosses had different views on whether competitive conditions were easing.<\/p>\n

Westpac chief executive Peter King would not be drawn on the outlook for pricing \u2013 citing a ban on \u201cprice signalling\u201d by banks \u2013 but said some of the most aggressive pricing had cooled off.<\/p>\n

\u201cWhat I\u2019d say in the last half was we saw smaller discounts on mortgages. And we saw either the removal or the reduction of cashbacks, which was better for the economics of the consumer bank,\u201d King said.<\/p>\n

The Reserve Bank of Australia on Friday also said competition for housing loans had \u201ceased\u201d, though it said banks were still prepared to negotiate discounts with existing customers.<\/p>\n

NAB boss Ross McEwan, in contrast, argued there had been little cooling off. Under his leadership, NAB has been prepared to grow at a slower pace in home loans, as it focuses on its flagship business bank.<\/p>\n

\u201cTo say competition has backed off, I just don\u2019t think that\u2019s the case,\u201d McEwan said, noting that he was seeing \u201csome of the thinnest mortgage margins\u201d across his time in Australian banking.<\/p>\n

Macquarie, the fifth-biggest home lender, indicated in its recent results that it remained keen on carving out a bigger slice of the home lending market.<\/p>\n

Macquarie chief executive Shemara Wikramanayake last week said there was a \u201clong runway to grow\u201d in home loans, business banking and wealth branches of the business. \u201cWe feel comfortable that we should be able to continue to take share, not just in the mortgage markets where we\u2019re at about five per cent but also in the business banking market,\u201d she said.<\/p>\n

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Save articles for later Add articles to your saved list and come back to them any time. Bank profits have peaked and are set to come under further pressure from stiff competition in home loans, investors say, as the market prepares for updates from two key protagonists in the mortgage war: ANZ Bank and Commonwealth Bank. After results this week […]<\/p>\n","protected":false},"author":3,"featured_media":135251,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\nBank profits past their peak as mortgage war takes toll - All My Biz News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/allmybiznews.com\/markets\/bank-profits-past-their-peak-as-mortgage-war-takes-toll\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bank profits past their peak as mortgage war takes toll - All My Biz News\" \/>\n<meta property=\"og:description\" content=\"Save articles for later Add articles to your saved list and come back to them any time. 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