With higher mortgage risk weights on the horizon for the major banks Macquarie expects them to restore lost returns via re-pricing. This may benefit the small cap banks but not be enough to offset the low growth environment they face.
Auswide Bank is likely to struggle with credit growth subdued in its core region. Macquarie downgrades cash earnings estimates by 1.6% for FY15.
Target is reduced to $5.24 from $5.65. Underperform retained.
Target price is $5.24.Current Price is $5.08. Difference: $0.16 – (brackets indicate current price is over target). If ABA meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges – negative figures indicate an expected loss).