Analyst insights: Top picks among the big four banks
Morningstar's Jacqueline Moody says loan losses and increasing competition will be key themes for the sector in 2023.
Key points:
Transcript:
Jacqueline Moody: So, unsurprisingly, we expect rising interest rates to be a key theme for the banks in 2023. The effective 8th interest rate increase is likely to have a positive effect on their earnings. On the other side of this, however, rising interest rates as well as high inflation is likely to impact borrowers' capacity as well as their ability to repay their mortgages. So, because of this and as well as the increased funding costs for the bank, we think loan losses as well as competition for consumer deposits will be key themes to watch out for in 2023.
So, our top banking picks for 2023 are Westpac and ANZ. Both of these stocks have lost some market share, particularly in the home loan lending space over the last couple of years. And we think that the market is still unnecessarily penalizing them for this. Both of these banks have now made some investments, particularly in technology, in order to improve the efficiency and the timeliness of their home loan lending approvals, and we expect the benefit of this to flow through.
