Encouraging first half year results of Australia’s top banks are expected to signal the end of a bad debt cycle and shrinking net interest margins, though the possibility of aggressive central bank rate increases remains a cause of concern – reported Reuters.
Australian banks almost came out unscathed from the global financial turmoil due to a government guarantee on wholesale funding and an economy that has left behind its global counterparts, leading to fewer loan defaults. Healthy credit growth and stock market gains have also pushed profits up in the first half of 2009.
Reportedly, the top four Australian banks have an estimated A$20 billion in excess capital, keeping them in a good position to take advantage from a turnaround in the economy and to acquire assets in the downturn. Australian banks have also raised A$120 billion in new capital in 2009 and cut dividends to bolster their balance sheets.
These results indicate that an end to the rising bad debt cycle is in sight and margins are on the rise.
According to the news agency, Hamish Carlisle, a senior portfolio manager at AMP Capital Investors, which holds shares in Australia’s four largest banks, said: “The major theme is going to be the shift in outlook which will be driven by the massive turnaround in the economic backdrop since the last update.”
