Citi downgrades Australia’s big four banks on lower rate cut expectations and valuation concerns

Small Caps04-23

Global investment bank Citi downgraded its recommendations for ANZ (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac (ASX: WBC) this week after ...

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class=\"title\">\nCiti downgrades Australia’s big four banks on lower rate cut expectations and valuation concerns\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-23 10:13 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://smallcaps.com.au/citi-downgrades-australia-big-four-banks-lower-rate-cut-expectations-valuation/><strong>Small Caps</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Global investment bank Citi downgraded its recommendations for ANZ (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac (ASX: WBC) this week after ...</p>\n\n<a href=\"https://smallcaps.com.au/citi-downgrades-australia-big-four-banks-lower-rate-cut-expectations-valuation/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK7511","symbol_name":"ESG概念","start_time":0,"source_url":"https://smallcaps.com.au/citi-downgrades-australia-big-four-banks-lower-rate-cut-expectations-valuation/","article_id":"2429138205","we_media_id":null,"thumbnails":["https://cdn.shortpixel.ai/client/w_868,q_lossy,to_auto,ret_wait/https://150309019.v2.pressablecdn.com/wp-content/uploads/2024/04/Citi-sell-rating-big-4-Australian-banks.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2429138205","pubTimestamp":1713838406,"sourceInfo":{"source_id":"smallcap_stock","name":"Small Caps"},"weMediaInfo":null,"summary":"Global investment bank Citi downgraded its recommendations for ANZ , Commonwealth Bank of Australia , National Australia Bank  and Westpac  this week after diminishing rate cut expectations exposed significant downside risks.It said any chance of a cut was progressively being pushed out, leaving banks exposed to poor earnings at rich valuations.Citi’s downgrades come a month after Macquarie Bank  told its clients to be “underweight everything” in the banking sector.“The reality is that the banks have flat to negative growth coming up for this year,” it said.“From a capital management perspective they have all got excess capital, so there will be more buybacks and dividends to come.”The market has placed a 76% chance on the Reserve Bank of Australia cutting interest rates for the remainder of 2024.The rate has sat at 4.35% since November.A cut is fully priced in for next year and could hurt big bank profits.Analysts are most positive on Westpac as they believe management has stabilised ","collect":0,"end_time":0,"defaultTopTitle":"smallcaps.com.au","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK7511":"ESG概念","BK7135":"综合性银行","XAO.AU":"标普/澳交所 普通股指数","CBA.AU":"COMMONWEALTH BANK OF AUSTRAL","XKO.AU":"标普/澳交所 300指数","WBC.AU":"WESTPAC BANKING CORPORATION","XJO.AU":"标普/澳交所 200指数","ANZ.AU":"ANZ GROUP HOLDINGS LTD","NAB.AU":"NATIONAL AUSTRALIA BANK LTD","MBLPC.AU":"MAQUARIE BANK"},"translate_title":"花旗下调了澳大利亚四大银行的评级，原因是降息预期和估值担忧降低","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ANZ.AU":1,"CBA.AU":1,"MBLPC.AU":1,"NAB.AU":1,"WBC.AU":1,"XAO.AU":1,"XJO.AU":1,"XKO.AU":1},"content_text":"Global investment bank Citi downgraded its recommendations for ANZ (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac (ASX: WBC) this week after diminishing rate cut expectations exposed significant downside risks.\nIt said any chance of a cut was progressively being pushed out, leaving banks exposed to poor earnings at rich valuations.\nCiti’s downgrades come a month after Macquarie Bank (ASX: MBLPC) told its clients to be “underweight everything” in the banking sector.\n“The reality is that the banks have flat to negative growth coming up for this year,” it said.\n“From a capital management perspective they have all got excess capital, so there will be more buybacks and dividends to come.”\nRate cut sensitivity\nThe market has placed a 76% chance on the Reserve Bank of Australia cutting interest rates for the remainder of 2024.\nThe rate has sat at 4.35% since November.\nA cut is fully priced in for next year and could hurt big bank profits.\nIn the 2023 financial year alone, the Commonwealth reported a net profit after tax of $10.2 billion, National recorded an 8.8% jump to $7.7b, the ANZ’s profit amounted to approximately $7.13b and Westpac’s net profit jumped 26% to $7.2b.\nBank valuations\nValuations also continue to expand, with all four banks reported to be trading on a price-to-book multiple of 1.7 — a rally which according to one analyst has become “increasingly disconnected with earnings directionally and in absolute terms relative to any metric of history.”\nThe Commonwealth’s price-to-book ratio recently peaked at 2.7, a multiple last seen in 2015.\nIts share price — which has increased 15.4% in the past six months to currently sit above $112 — has also been deemed overpriced.\n“Commonwealth Bank is often regarded as the most expensive bank and its valuation has only expanded off the back of its dominant positioning in retail banking,” one analyst said.\n“Nonetheless, [we] caution that the retail banking landscape is becoming increasingly challenging, marked by depressed mortgage spreads and escalating deposit competition.”\nAnother admitted to being “reasonably positive” on the banks, “even if the valuations are hard to get your head around”.\n“It is the highest set of valuations we have seen for decades, but we have been tempted on the other side given that their earnings have held up relative to expectations,” they said.\nMargin concerns\nNational Australia Bank has performed strongly in recent times — up 30% in the last five years versus ANZ up 3.6% and Westpac down 7.8% — due to operational improvements and faster business credit growth.\nHowever, there are expectations that this outperformance will eventually reverse itself as system business credit slows and becomes more competitive, weighing on margins.\nAnalysts are most positive on Westpac as they believe management has stabilised the business, while ANZ offers a “better level of earnings resilience” compared to its retail small-to-medium enterprise banking peers.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; 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