Australian Banking Sector Update

Submitted by Jim Thesiger on 2 May, 2008 - 01:12

Here is an update on the Australian banking sector provided by Australian market analyst UBS.

Australian Banking Sector- Credit growth - is this the tipping point?

March credit growth: 0.8%: business 0.9%, personal -0.2%, housing 0.8%:

March system credit grew at 0.8%; driven by: (1) good headline growth in business lending 0.9%, although higher due to Feb revision down from 0.5% to 0.3%, (2) sharp slowing in personal credit growth - .2%, the second negative month this yr, (3) housing credit growth stable at 0.8%, with non-banks share continuing to slow.

Is March the tipping point?:

While March data appears reasonable we believe there are signs of a substantial slowdown in credit growth. (1) Housing: 11.2% yoy vs 9.9% March (annualised) (2) Personal: 9.8% yoy vs -2.9% March (annualised) (3) Business 21.4% yoy vs 11.4% March (annualised)

We believe this reflects: slowing demand for credit given decreasing consumer & business confidence/sales, higher rates & re-pricing (rationing) of credit by banks.

Who's growing in credit cards? SGB, SUN and BWA:

Given concerns over economic stress are now turning to the consumer we thought it prudent to highlight the banks growing in credit cards. BWA has the strongest growth at 7.3% in March (off a low base), followed by SGB 1.5% in March (8.1% six-month-alised), and SUN 1.1% in March (9.1% six-month-alised).

Remain cautious on Sector. PE now 11.0x FY09E.:

We remain cautious on the sector given: (1) "bad boy" event risk, (2) slowdown in credit demand imminent in our view with c39bp in rate hikes still to fully impact consumers & as bank continue to pass higher funding cost on to businesses.

Download our FREE App


Signup for Free
Don't miss out on your free share trading articles.


Free Risk Money Management Calculator for those who sign up!