Less Tailwind, More Tension Ahead

Research evidence excerpt

Less Tailwind, More Tension Ahead

Banks

Equity Research

May 19, 2026

Executive summary: Less Tailwind, More Tension

Ahead

Section 1: 1H26 results were solid overall, with underlying PPOP growth of c8% across ANZ, CBA

and NAB, while WBC lagged. Strong loan growth (c7%) offset modest margin compression and

higher costs. Revenue performance was stronger at CBA and NAB, although this was partly offset

by expense growth. Impairments increased due to collective provision builds, creating divergence

at NPAT; on u/l basis, CBA /ANZ led earnings growth (6–8%), while NAB/WBC were broadly flat.

Section 2: Structural headwinds to housing credit are emerging. Changes to investor taxation are

likely to reduce demand for established housing, which represents the majority of investor activity.

This implies weaker investor approvals and a lower share of system housing demand, acting as a

modest but persistent drag on credit growth and earnings. The impact is primarily through volumes

rather than credit quality.

Section 3: The outlook points to modest near-term support for margins, followed by renewed

pressure. Replicating portfolio tailwinds and supportive deposit dynamics should drive modest

NIM expansion into 2H26 (ex WBC), before flattening through 1H27 and compressing from 2H27

as back-book benefits fade and competitive intensity persists. With returns only marginally above

hurdle rates and payout ratios elevated, scope for sustained sub-economic pricing appears limited,

although competition in housing remains a key risk.

Section 4: Differences in rate leverage remain a key driver of earnings dispersion. Variation in

hedge tenor and portfolio size has driven a wide spread in hedge rates (c60bp), with WBC benefiting

most from shorter duration.