Australia Banks: FY26 Earnings Preview: Is the June quarter a peak in the cycle?

Research evidence excerpt

Australia Banks: FY26 Earnings Preview: Is the June quarter a peak in the cycle?

Australia Banks

10 July 2026 Citi Research

FY26 Earnings Preview

Middle east situation continues to remain volatile. As we look ahead to the FY26

results it was time to dust off the March playbook as to how the banks reacted.

When the Middle East conflict began, it was a fair assumption that this would turn

into an environment of stagflation. This thinking permeated into the May results

season, as the market digested the expectation of slowing economic and credit

growth, rising rates and higher credit risk which prompted higher provisions.

Although we do see a possibility of cessation of conflict since then, the resumption

of escalation need not pre-empt the same response.

Heading into the FY26 reporting season, the banks enter from a much more benign

starting point. The banks rallied after the February results, a position that ran into

difficulty as volume expectations were moderated and provisions were topped up.

Since then we have seen the economy broadly hold up, yet expectations are much

lower on the banks given the ~7% underperformance vs the XJO over the past three

months.

Similarly to the March quarter, the June quarter results offer potentially another

backward-looking view of the economy and the banks. However, we expect few

surprises and positioning is modest, and consequently we see less downside risk

heading into the prints than what we expected going into recent quarterly/half year

updates.

Three points worth considering:

1. The impact of peak-ish rates?

Rates markets are now pricing in a peak cash rate of 4.46% by December, another

~11bps on top of the current 4.35%. Our economists still expect one more hike in

November for a peak of 4.60%.