Morningstar senior equity analyst Nathan Zaia has offered a generally positive assessment of Australia’s banking sector. According to Zaia, while net interest margins may experience short-term softening due to falling cash rates, a modest improvement is expected in the medium term. Banks are anticipated to gradually reduce rates on savings and term deposits relative to the cash rate, while also offering fewer discounts on new home loans.
Zaia forecasts a 5 per cent annual net interest income growth through fiscal year 2029, driven by stable net interest margins and low-single-digit loan growth. Net interest income constitutes approximately 85 per cent of bank revenue. Zaia noted that cost-containment measures should support cash profit growth, despite an anticipated increase in bad debts.
In his analysis, Zaia highlighted ANZ’s potential for improved operating efficiency and the successful integration of Suncorp Bank. He also pointed out that Commonwealth Bank appears to be the most expensive, with a forward price-to-earnings ratio of 26 times and a fully franked dividend yield of around 3 per cent. He added that Macquarie’s success is due to consistent and quick loan approvals, making it a favourite among brokers.
Zaia stated that Macquarie has been growing 4.4 times faster than the market. If Macquarie maintains its recent growth trajectory, its loan book could almost double within five years. He suggests that smaller lenders that rely more heavily on brokers are likely to be the most impacted by Macquarie’s growth.
