Fitch: Big 4’s earnings to come under pressure

NEW YORK: Fitch Ratings said yesterday it expected the shortterm earnings of Australia’s “Big Four” banks to come under pressure due to slower credit growth.

“Credit growth, especially in the residential mortgage segment, is slowing and non-interest revenue is likely to remain stagnant or decrease,” said Fitch.

The banks would have to raise lending margins to maintain profitability, though that remained a challenging prospect in the face of an inquiry into the financial sector, said the rating agency.

Australia’s biggest banks are imposing stricter lending conditions on borrowers as damaging disclosures at the Royal Commission into financial-sector misconduct prompt fears the economy will be the victim of a new era of subdued credit growth.

Australia and New Zealand Banking Group said last week revenue growth would slow in the wake of inquiry, which revealed sweeping irregularity in lending practices, as tighter regulation made it harder for customers to borrow money.

In its budget for this year, the Australian government flagged a possibility that household spending might be affected by any unanticipated tightening in financial conditions, possibly as a consequence of the Royal Commission.

Australia has an oligopoly banking system — with ANZ, Commonwealth Bank of Australia, Westpac Banking Corp and National Australia Bank making up the so-called “Big Four” — which collectively dominate property, investment and business lending, giving Australians limited options when seeking credit.