Research Insights

[VIDEO] Analyst insights: Bank earnings have "peaked" but dividends could still rise

Nathan Zaia  |   31st May 2023 | 4 min read
https://video.morningstar.com/aus/hd/2023/230516_Zaia_Banks_hd.mp4

Key points: 

  • Banks have benefited from rising interest rates, but margins and earnings appear to have peaked.
  • The second half is likely to be a bit weaker than the first half. But over time, we expect the market to be rational in setting prices for both deposits and mortgages and try to make a decent return for shareholders.
  • The outlook for bad debts is also weighing on bank shares. We expect to see a material rise over the next 12 months, but we don't think it'll be anywhere near as bad as we saw in the GFC.
  • Dividends could potentially grow a little bit in the second half even if earnings are weaker because first half payout ratios were at the lower end of their target ranges.

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