Corporate lending to rebound
(17 January 2010 – Australia) Banks in Australia will rely heavily on a business lending rebound in the coming months, as the residential mortgage market slows down.
A research piece by Morningstar found that the top four Australian banks are "attractively priced on valuations, despite market underperformance.
David Ellis, head of banking research, said each of the major banks had forecast the Australian mortgage market would begin to slow after rapid growth in the past two years and interest rate rises from the Reserve Bank.
As a result of the mortgage market slowing banks would become more reliant on business lending to make up for the softer earnings from home loans, Mr Ellis added.
'All four banks are optimistic about the business lending outlook, but despite strong loan approvals we do not expect a rebound in corporate lending until the second half of 2011, before ramping up over 2012 and 2013,' Mr Ellis said.
'The timing is a key risk as a recovery in business lending is necessary to deliver earnings growth, particularly as mortgage growth is abating.'
Despite the mortgage forecasts, figures from the Australian Bureau of Statistics show the value of new home loans rose by 2.9 percent during November, despite an interest rate rise that month.
David Ellis, head of banking research, said each of the major banks had forecast the Australian mortgage market would begin to slow after rapid growth in the past two years and interest rate rises from the Reserve Bank.
As a result of the mortgage market slowing banks would become more reliant on business lending to make up for the softer earnings from home loans, Mr Ellis added.
'All four banks are optimistic about the business lending outlook, but despite strong loan approvals we do not expect a rebound in corporate lending until the second half of 2011, before ramping up over 2012 and 2013,' Mr Ellis said.
'The timing is a key risk as a recovery in business lending is necessary to deliver earnings growth, particularly as mortgage growth is abating.'
Despite the mortgage forecasts, figures from the Australian Bureau of Statistics show the value of new home loans rose by 2.9 percent during November, despite an interest rate rise that month.
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