First Read: Australian Banking Sector Update "Australian Federal Budget ..."

Research evidence excerpt

First Read: Australian Banking Sector Update "Australian Federal Budget ..."

Global Research

12 May 2026ab

First Read

EquitiesAustralian Banking Sector Update

Australian Federal Budget and the Bank Sector Australasia

Financial

John Storey, CFA

2026-27 Federal Budget and our initial view on bank sector implications Analyst

The Treasurer, Hon Dr Jim Chalmers, presented the Federal Budget (here), which we view john.storey@ubs.com

as slightly negative for overall mortgage growth, due to the loss of tax incentives for +61-2-9324 3864

investor mortgages (~56% of mortgage flow, and ~33% of mortgages outstanding for Nicholas Sobolev

the majors at end-1H 26). Key read throughs and implications for the Aussie banks Analyst

sector are, in our view, around 1) mortgage growth: slightly -ve, 2) Margins: slightly -ve, nicholas.sobolev@ubs.com

and 3) asset quality: slightly neutral. Overall, we believe bank stocks most exposed are +61-2-9324 3026

CBA and WBC, with lending portfolios more tilted to investor mortgage lending.

Mortgage growth outlook: overall growth trends could slow from here

The Budget reduces the after-tax appeal of leveraged established-property investment

and should slow investor mortgage growth (20% of system and 40% of mortgage

flow). Construction finance, presale-linked lending and new-build mortgages should

benefit, but planning, build costs and developer risk mean this will not quickly replace

established-investor turnover. Grandfathering limits forced selling and credit risk, but

the sector faces weaker housing system growth, poorer mortgage mix and more

competition for owner-occupier flow. Investor mortgages for the large banks have

grown strongly over the past decade (CBA the most), as banks have pivoted toward