From Morgan Stanley:
Margin pressure is increasing. Our FY17E margin and EPS forecasts are lowered by an average of ~2bp and ~2-3% respectively, even though we factor in another 30bp of home loan re-pricing.
Trimming major banks’ margins in FY17E: Competition in institutional banking has been the key headwind for margins in recent periods. However, margin pressure is becoming more broad based, with downside risk from lower interest rates, intense competition for new home loans,higher wholesale funding costs and term deposit margin squeeze. Despite the scope for further home loan back book re-pricing, we think it will be increasingly difficult for banks to hold margins stable and we have trimmed our FY17E margin forecasts by an average of ~2bp. Our FY17E cash EPS forecasts are downgraded by an average of ~2-3%.
