After a mortgage boom, banks are about to come under serious earnings pressure. Holding customers means being a bank, not a financial supermarket, writes David Myers.
Credit Suisse’s spectacular implosion and the recent collapse of multiple US Banks may have happened for different reasons, but their effect has been the same: financial markets are spooked, so regulators are pledging to provide the liquidity needed to stave off a GFC-style collapse.
The proof is between the lines in the Big Four’s latest results and earning updates, which were stellar – a clear result of a lending boom caused by pandemic-era record low interest rates, which were then quickly jacked up in the Reserve Bank’s fastest tightening cycle in decades.It allowed the banks to hike variable rates on loans arguably faster than they increased interest rates on deposit accounts. The result was a strong uptick in the banks’ net interest margin , supporting record profits.
They’ll be looking for a deal in a market that is becoming, as CBA chief Matt Comyn put it, “irrational,”
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