Australian banks rank lowest in global Q3 earnings outlook: UBS

The housing downturn is expected to weigh in on profitability.

Australian banks have the gloomiest Q3 earning outlook in a survey released by wealth manager UBS, reports Business Insider Australia.

Also read: Foreign lenders flock to Australia as local lenders reel from damning probe

“By country, we are very cautious only in Australia and slightly cautious in Italy and in the US regionals,” the analysts said. On the other hand, UBS remains bullish in France, Japan, Nordics, Spain, the UK and the US.

UBS notes that Australian banks face a “lacklustre growth outlook” brought about by expected weaker credit demand as previously heated home prices begin to fall, hitting the banks’ profitable mortgage business. Home prices lost steam after crashing from 4.2% in December to a measly 0.2% in April. 

Also read: Bad loans inch up in Australian banks as mortgage arrears climb

It also cited additional downside pressure to earnings from the new liability levy and that Return on Equity (RoE) is in structural decline for most banks.

The number of respondents who took a positive view of Australia’s banking sector also fell slightly from 53% in Q2 to 50% in Q3.

This echoes the results of another survey released by market research firm Roy Morgan showing that bank customer satisfaction in Australia fell from 82.3% in January to 78.5% in May following a probe by the Royal Banking Commission which laid bare widespread industry malpractice in the financial services sector.