Sen­ti­ment takes a neg­a­tive turn

Money Magazine Australia - - SHARES | IN BRIEF -

There are a large num­ber of head­winds for Aus­tralian bank earn­ings, says UBS bank­ing an­a­lyst Jonathan Mott.

For many years the mar­ket re­acted pos­i­tively to banks that grew their lend­ing books, driv­ing stronger rev­enue and earn­ings, he says.

“How­ever, as the hous­ing cor­rec­tion con­tin­ues, and with the banks un­der pres­sure to com­ply with re­spon­si­ble lend­ing and tighten ‘lax’ un­der­writ­ing stan­dards, we be­lieve this is no longer the case.”

Mott says the risk of a credit crunch is ris­ing as credit avail­abil­ity tight­ens and the hous­ing mar­ket slows. There is a change in con­di­tions, and a grow­ing mar­ket share in in­vest­ment prop­erty lend­ing is no longer viewed pos­i­tively by the mar­ket but seen as a sign of risk tak­ing.

“We re­main very cau­tious on the banks,” he says.

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