In its second and final stability review for 2019, the RBA has warned on a combination of factors that will depress bank earnings, starting with the continuing rise in customer remediation over abuses exposed by the Hayne Royal Commission.
National Australia Bank will leave its standard variable home loan unchanged at 5.24%. Morgan Stanley believes the decision suggests scrutiny of conduct and competition is affecting management's decision-making and will weigh on profitability and the performance of the share price.
Upon further analysis, Morgan Stanley believes management can deliver on its cost targets while keeping loan loss rates below peers in Australia. However, the analysts also see earnings risks and this leads to the conclusion that "too much optimism" is surrounding the share price.
The bank’s third quarter trading update reveal cash net profit of $1.7bn. The bank is tracking in line with expectations to date. UBS suspects mortgage re-pricing is likely to fully offset the impact of the bank levy.