Powered by MOMENTUM MEDIA
subscribe to our newsletter
Australian bank oligopoly ‘alive and well’

Australian bank oligopoly ‘alive and well’

The big four Australian banks are likely to continue to benefit from the ‘wealth effect’ created by strong asset values, with investor concerns about high residential mortgage exposures “overdone”, says Morningstar.

In an analyst note about Westpac, Morningstar said Australia's "rational and highly profitable major bank oligopoly is alive and well".

The dominant position of the major banks will be further fueled by the ‘wealth effect’ from strong asset values, the expected rise in household spending, ongoing contributions from exports, the east coast residential construction boom and continuing government investment in infrastructure, said the research house.

Advertisement
Advertisement

Westpac remains Morningstar's preferred major Australian bank, with its home-loan growth strategy viewed as a core strength rather than a key weakness.

"Investor concerns, centred on [Westpac's] large exposure to residential mortgages, are overdone ... We see solid earnings upside potential, with international investors continuing to focus too much attention on negative short-term issues," said Morningstar.

The pressure on the banks to raise capital in order to satisfy the prudential regulator is likely to ease in coming months, said the note.

"We expect APRA will allow the major banks to raise the expected higher minimum capital requirements organically over a three-to-four year period," said Morningstar.

"Despite regulator and media noise, it is becoming increasingly clear the capital raising scenario has been delayed for Westpac and major Australian bank peers.

"This is a positive outcome and one we have been pushing for several months at least."

[Related: Govt urged to tackle banking 'oligopoly']

Australian bank oligopoly ‘alive and well’
mortgagebusiness
  • 23
    Days
  • :
  • 07
    Hours
  • :
  • 54
    Minutes
  • :
  • 01
    Seconds

EARLY BIRD CLOSING SOON
Have you secured yours?

Latest News

Stagnant housing market activity is expected to prolong the stay of borrowers in arrears, with the forecast fall in home values to be among...

The non-bank sector is expected to “lead the way” in 2019, after issuing more than 60 per cent of new home loans in 2018, according to S...

The volume and value of new residential buildings fell in the September quarter 2018, reflecting the “softening” housing market the HIA ...

FROM THE WEB
podcast

LATEST PODCAST: How a softening property market will impact the mortgage sector

Is enough being done to ensure responsible lending?