Bank revenue growth set to improve

Despite the good margin outcomes and improvement in housing loan growth, 2021 is turning out to be another year of weak revenue trends at the major banks. 

Broker Morgan Stanley said with its forecasts imply that revenue ex notable items will be down one percent year on year. 

However, this is partly due to Treasury and Markets income, which will likely fall by about 20 percent. By stripping out this business, the broker is forecasting revenue to be flat this year compared to -3 percent last year. 

However, the broker is predicting better performance in the second half of the year.  

Excluding income from Treasury and Markets, Morgan Stanley is forecasting revenue to rise 3 percent for the second half of the year - up from -2 percent in the first half and half on half growth to increase to two percent from one percent. 

The broker noted that Commonwealth Bank reported growth of 4 percent for the second half of 2021. 

CBA, the largest of the big four banks, reports its annual results in August, whereas the other three do not report full-year results until October.  

For the September half, Morgan Stanley is forecasting NAB will see three percent growth in the second half to do better than Westpac at one percent and ANZ at -1 percent compared to the year ago same period. 

“We believe margins will be the key swing factor for revenue in the 2021 second half. At the same time, cost control remains important given that revenue growth remains relatively modest.” 

“In the near term, we think NAB offers the best combination of improved operating momentum and confidence in earnings estimates.  

Looking ahead to 2022, the broker is forecasting major bank revenue to grow by an average of three percent led by CBA (4.5 percent) and NAB (3.5 percent). “We see upside risk to our loan growth forecasts, but {there is} potential for this to be offset by more margin pressure.”  

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