Banks

Some interesting slides in the BEN result update.

Firstly, NIM’s were hammered, which is likely a key reason for the stocks fairly dismal trading today.

However, they also showed the monthly NIM evolution, and the exit rate, which is markedly better, and, as expected, tracks the cash rate movements.

CBA have suggested something like 4-bps of NIM per 25bp rate hikes. So 8 hikes might be the better part of 30-40bps on the NIM, which is quite enormous as a margin driver.

BEN are suggesting 46bps worth of NIM expansion, based on market implied rates.

Now the market hasn’t rewarded the banks given falling NIMs, even though bad and doubtful debt charges have been extremely low, in some cases actually negative, as prior loan loss provisioning was written back.

Will the market be more favourably inclined towards the banks as NIM’s rise, but bad and doubtful debt charges normalise?

Or will they remain out of favour in either?

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