Corporate lending tilt to drive up capital strain for Australian banks, says Jarden
BUZZ-Corporate lending tilt to drive up capital strain for Australian banks, says Jarden ** Jarden sees major Australian banks facing increasing capital strain, driven by a shift toward corporate lending, greater sensitivity to economic downturns and interest rate risks
** The Labor government said in May it would restrict negative gearing, — which allows investors to offset property losses against taxable income — to newly built homes, a move that threatens to slow investor housing credit growth
** A sustained shift toward corporate lending will increase capital requirements as these loans carry a higher risk weightage than housing loans, Jarden says
** Banks may have over-optimized during a period of very benign credit environment; risks can rise if the credit cycle turns, the investment bank adds
** "There is no free lunch from increasing the hedge on free deposits and equity when interest rates rise and remain elevated" - Jarden
** Despite recent re-rating, Jarden says major banks remain expensive at around 18 times earnings and not priced for any negative regime change
(Reporting by Shruti Agarwal in Bengaluru)
Recent news on Westpac Banking
See all newsKPMG Australia scandal widens after it confirms Optus data was also misused (updated)
Australian lawmakers, grilling KPMG, suggest more regulation of audit industry may be needed
From airlines to banks: Australian, New Zealand firms feel heat of Gulf crisis
Australian banks fall after Jarden flags capital strain from corporate lending shift
Corporate lending tilt to drive up capital strain for Australian banks, says Jarden