As we approach potential RBA rate cuts from February 2025 onwards, Australian bank stocks are potentially facing an interesting crossroads, namely;
<Net Interest Margin (NIM) Pressure>: Lower rates could squeeze NIMs, particularly as banks will likely pass on cuts to variable housing rates in full.
<Competition Heats Up>: Aggressive discounting by ANZ and NAB is intensifying the battle for market share.
<Valuations Stretched>: The recent rally in bank shares might be running out of steam, with price-to-book ratios looking expensive.
<Mixed Outlook>: While banks like CBA and NAB are well-provisioned, others may struggle in a lower rate environment.
<Tactical Moves>: Underweighting major banks could be prudent ahead of seasonal market challenges.
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