The big four banks are nearing the end of their financial reporting period, with results expected in the coming days. This comes amid continued growth in housing prices and robust credit activity. Despite improved consumer confidence and favourable lending conditions, banks are facing mounting pressure from increased competition for both customers and deposits. Westpac in particular is losing ground to rivals such as Macquarie and ANZ.
Westpac is forecast to post a slight dip in annual cash profit, reporting around $6.9 billion compared to $7 billion the previous year. This comes even with support from recent Reserve Bank interest rate cuts, which have made borrowing conditions more attractive. Westpac's pivot from home loans to the more competitive business lending market is compressing its margins. Changes in leadership and key strategic shifts are also drawing scrutiny from investors seeking direction for how the bank plans to recover.
Despite these challenges, investor sentiment remains buoyant. Shares in the big banks have risen by more than 17% on average this year, outperforming the broader ASX 200. ANZ has led the pack, with its share price climbing nearly 30% as it adopts a refreshed strategy. Still, analysts caution that these high valuations must be maintained by steady performance, especially as the sector contends with rising costs and investments in technology.
Although loan defaults remain low and asset quality is solid across the board, net interest margins are being squeezed. This is particularly evident at Westpac, which is growing its lending portfolio faster than it can attract deposits. Analysts warn this could lead to further cost-cutting measures or tighter efficiency targets, as banks like ANZ push ahead with aggressive profitability and performance goals.
When Westpac releases its full-year results on Monday, the focus will not only be on financial performance but also on how the bank intends to hold onto market share and strengthen profit margins in a much more competitive landscape. NAB and ANZ are facing scrutiny as well, though expectations for those institutions appear more modest.
