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Australia’s Top Lender Loses Last Buy Rating On Cautious Outlook
August 11th, 2022 | 11:59 AM | 317 views
Commonwealth Bank of Australia, the country’s biggest lender, lost its last buy rating after Jefferies Financial Group Inc. downgraded the stock following its full-year results.
The broker lowered its recommendation to hold after the Sydney-based bank’s earnings on Wednesday, citing slowing credit growth and rising expense pressures. While Commonwealth Bank posted an 11% jump in profit, it cautioned that steeper borrowing costs and inflation were hitting consumer demand.
“The macro outlook for Australian banks is deteriorating” as rising rates crimp credit expansion, Jefferies analysts led by Brian Johnson wrote in a note. Intense deposit competition is also weakening the company’s net interest margin outlook.
While Australia’s largest lenders have passed on the Reserve Bank’s record series of interest rate hikes since May, they’re yet to show a significant rise in problem loans even after years of extreme mortgage competition. However, sentiment has taken a cautious turn as the nation’s debt-laden consumers grapple with the fastest tightening cycle in a generation.
Commonwealth Bank now has no buy ratings, five hold ratings and 10 sell ratings, according to data compiled by Bloomberg. Australia’s three other major lenders each have at least six buy ratings.
CBA shares are little changed this year, while the benchmark S&P/ASX 200 Index is down 5.2%.
courtesy of BLOOMBERG
by Georgina McKay
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