Australian Banks: Steady Amid Headwinds in FY2024 Results
As we wrap up the FY2024 reporting season for Australia's major banks, it's time to take stock. Here's our quick analysis:
🔹 Margin Stability: Banks saw margins stabilize, thanks to smaller-than-expected deposit migration and competition pressures.
🔹 Volume Growth: Lending growth surprised on the upside, with some banks reporting annualized growth rates of 8-11%.
🔹 Low Impairments: Credit quality remained robust, with impairment charges at cyclically low levels.
🔹 Capital Strength: Major banks maintained strong capital positions, with pro-forma CET1 ratios ranging from 11.9% to 12.4%.
🔸 Future Challenges: While FY2024 performance was credible, the outlook isn't all rosy. Earnings growth remains anaemic, with potential declines expected in FY25-26 as interest rates potentially fall and impairment charges rise.
🔸 Valuation Concerns: Banks are trading at historically high valuations, approximately 3 standard deviations above their average since 2001.
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