Boston, MA -- (SBWIRE) -- 11/16/2012 -- BMI View: Australian banks should see their margin growth turn negative as we expect the housing market to continue to deteriorate and economic conditions sour. With little prospect of profits from businesses and real estate, we maintain our expectations for loan growth to contract by 2.0% 2012, while banks increase their proportion of funding from deposits as uncertainty grows in external financing markets. We maintain our bearish view on the sector, expecting higher funding costs and deteriorating asset quality to prevail. We could even see the industry perform more poorly than during the Global Financial Crisis, with the some banks potentially requiring government support. The four major Australian banks have all reported an increase in their earnings in H111/12 (October - March), growing an average of 4.5% from their H1 performance, but at a much slower rate than the past two years. However, the ongoing deterioration in the housing market is set to remove the pillar of growth which the major banks have built their performance on in recent years. As such, Australian banks continue to look overvalued from our perspective, with growing risks that the government may have to step in if a collapse in the housing market ensues.
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