Financially resilient borrowers who continued paying off their home loans despite soaring interest rates and cost-of-living pressures are expected to give three of the big four banks’ bottom lines a boost when the banks unveil their full-year results this week.
Investors and economists will be able to gauge the state of the nation’s economy in the 2024 financial year – as well as the health of the banking sector – when Westpac releases its results on Monday, followed by NAB on Thursday and ANZ on Friday.
Outgoing Westpac chief Peter King (left), ANZ boss Shayne Elliott and NAB chief Andrew Irvine will hand down their full-year results this week. Credit: Aresna Villanueva
The market expects the combined profits of the four major banks for 2024 will exceed $30 billion. Analysts say NAB, ANZ and Westpac will collectively rake in more than $20 billion in profits, down 8 per cent on last year’s records.
Commonwealth Bank reported a 2 per cent decline in cash earnings of $9.84 billion at its full-year results in August.
Although sticky inflation and two years of elevated interest rates have been eating away at household savings, which are well below the historic average, and the number of borrowers falling behind on their repayments has increased, most remain ahead of schedule. Analysts said the trend of low bad debt charges could support banks’ profits over the coming week.
“Some of the key themes likely to drive bank results could come from better than expected [net interest margin] outcomes, cost overruns and, most notably, lower than expected [bad and doubtful debt],” UBS analysts said in a research note.
Net interest margins, a key measure of profitability, compare funding costs with what lenders charge for loans. Bad and doubtful debts are debts that will not be paid or are unlikely to be paid.
The so-called mortgage wars – having amped up competition between the banks as the Reserve Bank of Australia started lifting the cash rate two years ago, ultimately squeezing the banks’ profit margins –have subsided over the past six to 12 months.
A research report from Citi notes consensus estimates of full-year profits of $6.95 billion for ANZ, $7.06 billion for NAB and $7.02 billion for Westpac. It reports net interest margins are anticipated to come in at 1.94 per cent for Westpac, 1.72 per cent for NAB and 1.56 per cent for ANZ, and it forecasts a decline in the three majors’ bad debt expenses, compared with 2023.