Via UBS’ excellent Jonathon Mott today:
The recent reporting season highlighted the revenue pressure the banks are under. The substantial mortgage repricing undertaken by the banks over the last six months has already been largely offset by: higher funding costs; front-book discounting; switching from Interest-Only to P&I; mix changes from Investors to Owner Occupiers and weaker Treasury income. …These headwinds show no sign of abating.
We believe it is likely the banks will wait for potential RBA rate cuts before repricing…There are a large number of moving parts, however scenario analysis suggests if banks are required to pass through the full 50bp of RBA cuts to mortgagors then EPS could fall ~5%. This is in addition to the NIM headwinds described above.