While Commonwealth Bank shares are setting fresh records, there’s no shortage of uncertainty around the outlook for the banks as cohorts of borrowers face a tough period.
There’s something just a little incongruous about shares in Commonwealth Bank hitting a record on the same day theto help cash-strapped borrowers negotiate the sector-wide switch from cheap fixed-rate loans to sharply more expensive variable rates.
But CBA is something else entirely. Its forward P/E of 17.8 times, and its price-to-book ratio of 2.56 times, easily make it the world’s most expensive bank.There is an argument that Australia’s banks should trade at a premium to banks in the US and the UK, given the economic outlook is stronger To be clear, this is one point on which analysts are uniformly positive: the Australian banks’ starting point is so good, with bad and doubtful debts so low, that any issues are likely to be confined to a small pool of borrowers.But it’s in the tail of markets where the biggest risks lie, and UBS economist George Tharenou suggests borrowers between 25 and 44 years are overleveraged to the point they will need a rate cut by the end of 2023.
But the Millennial cohort watched cash balances fall, with 25 to 34-year-olds’ balances down 9 per cent and balances of those aged 35 to 44 falling 18 per cent. Further, Tharenou says households in his cohort of concern have debt-to-income ratios of between 2.3 times and 3 times, leaving them vulnerable to the lagged impact of rising rates.to 3.35 per cent and to then pause in the face of a consumption slowdown that will start mid-year.
United Kingdom Latest News, United Kingdom Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
ASX to rise with key earnings, central bank decisions aheadAustralian shares are set to open higher after further gains in New York. Meta, Alphabet and Apple report this week. Federal Reserve decision early Thursday.
Read more »
‘Important’ measure influences US central bank on interest rate decisionCommSec’s Tom Piotrowski says on Friday the markets 'threaded the needle' on an important data release which the US central bank looks at carefully. “It’s titled rather awkwardly – it’s the ‘personal consumption expenditure deflator’,” he told Sky News Australia. Mr Piotrowski said it will 'influence what they do this week' when it comes to interest rates. Presented by CommSec.
Read more »
US Federal Reserve Bank to make first decision for interest rates for 2023The US Federal Reserve Bank will make its first decision on interest rates for 2023 after a 32-year high for inflation. “The Fed makes its first decision for 2023,” says Sky News Business Editor Ross Greenwood. “Australia’s Reserve Bank will make its first decision next week, of course, after that inflation rate last week. “All expectations are that the Reserve Bank here will continue to raise interest rates. “In the United States, the real speculation now is that after having had a series of half per cent rate rises, they’ll temper these back down to a quarter of a per cent rate rises but will continue to raise rates.”
Read more »
Deutsche Bank says cash rate will hit 4.1pcDeutsche Bank’s Philip O’Donaghoe said with inflation stronger than expected, the Reserve Bank needed to go harder, predicting a peak cash rate of 4.1 per cent.
Read more »
Deutsche Bank predicts four more interest rate risesDeutsche Bank Australia is predicting the Reserve Bank will raise interest rates four more times between now and August. The bank's Chief Economist Phil O'Donaghoe is forecasting a quarter of a per cent rate rises in February, March, May and August, which would take the official cash rate to 4.1 per cent. He is also predicting the unemployment rate to rise from 3.5 to 4.5 per cent by this time next year, which would see 100,000 workers out of a job.
Read more »
Rate cut on cards but businesses still heading for earnings recessionLiving cost pressures will be so tough on consumers that the Reserve Bank could be the first central bank to cut interest rates, predicts Morningstar.
Read more »