Australia’s four largest banks have collectively added approximately $72 billion in market value since the commencement of the reporting season. This surge has propelled the financials sector to the forefront of the Australian share market’s gains, as it approaches record highs. National Australia Bank (NAB) delivered a particularly strong earnings performance on Wednesday, driving its share price to a record high of $47.90.
Marc Jocum, Senior Product and Investment Strategist at Global X, noted that the banks had largely met high expectations this reporting season, solidifying their position as the market’s earnings anchor. According to Jocum, the results from the big four banks were generally strong and exceeded expectations. Net interest margins have stabilised at elevated levels and asset quality has remained resilient. Healthy capital positions are also supporting solid dividends and share buybacks, leading to a positive market response. National Australia Bank provides financial services to individuals and businesses. Westpac offers a broad range of banking and financial services in Australia and internationally.
Jocum identified valuation and dividends as the primary risks for banks, rather than balance sheet concerns. He cautioned that banks are no longer undervalued, and payout ratios offer less margin for error. A significant economic downturn, rising unemployment, or renewed mortgage stress resulting from the latest Reserve Bank of Australia (RBA) rate hike could put asset quality to the test. However, he added that the credit cycle is currently behaving reasonably well.
Recent trading saw NAB up by 4.3 per cent and Westpac gaining 0.3 per cent. Commonwealth Bank of Australia (CBA) experienced a slight dip of 0.6 per cent, while ANZ declined by 0.1 per cent.
