$10.4 billion test looms for ‘safe haven’ Australian banks

The major Australian banks’ reputation as a safe investment bet during market volatility caused by Donald Trump’s trade war faces a key test this week, as investors expect three of Australia’s biggest banks to post $10.4 billion in profits.

Commonwealth Bank, Westpac and National Australia Bank outperformed the ASX 200 during the market rebound over the past month, as investors piled into the sector after the chaos unleashed by the US president’s “Liberation Day” tariff announcements.

CBA shares shot to record highs on Friday, valuing the bank at more than $280 billion. ANZ Bank shares have outperformed the ASX 200 since January, though their bounceback during April was more modest.

Westpac, NAB and ANZ Bank will report half-year profits this week.Credit:

Fund managers say one reason for bank shares’ resilience is a perception they are a relative “safe haven” amid market turmoil, as the US tariffs are not expected to directly hit industry profits. But some analysts also say valuations are “stretched” – in particular CBA’s – making the next round of profit results, starting with Westpac on Monday, a key litmus test for the sector.

‘There’s some truth to the banks being a safe haven, but at the same time, the growth outlook is more modest than it was 20 years ago.’

Regal Funds Management head of fundamental research Mark Nathan

The effect of falling interest rates on banks’ bottom lines will also be an important issue for investors – markets are tipping about 1 percentage points of Reserve Bank interest rate cuts over the rest of 2025.

Regal Funds Management head of fundamental research Mark Nathan said investors were likely to focus on what bank results revealed about the sector’s bad debts, interest margins, capital and the level of competition.

Nathan said one of the key things to consider is whether banks could cut interest rates by less than any RBA cuts – though he expected banks would probably pass through any rate cuts to borrowers in full.

“We’ve got to be cognisant that, politically, it may be difficult for banks to move lending rates by less than any RBA cuts,” he said.

Nathan said that although bank shares had proven attractive to investors in recent months, that could change if the local economy deteriorated significantly. He said one reason some viewed banks as less risky than in the past is because mortgage lending has become a larger part of lending books, as opposed to business lending.

“They are a lot more defensive than they were 20 years ago – mortgage lending is a much bigger part of their book. There’s some truth to the banks being a safe haven, but at the same time, the growth outlook is more modest than it was 20 years ago.”

A principal at fund manager Alphinity, Andrew Martin, said the perception of banks as a safe haven also reflected investors’ comparisons between banks and other market sectors. Another major sector of the ASX – mining – is more exposed to the world economy and China. “Do you really want to be switching into commodities when China is under pressure or when the global economy is under pressure?” Martin said.

Atlas Funds Management chief investment officer Hugh Dive said that “relatively hot money” from overseas had flowed into Australian bank shares, and those money flows could reverse if bank results showed a jump in bad debts.

“That safe haven will be tested, and the thing people will be looking at is that bad debt charge,” he said.

New Westpac CEO Anthony Miller will deliver the bank’s results on Monday. Credit: Dominic Lorrimer

Westpac chief executive Anthony Miller will deliver his first result as chief executive of the Sydney-based bank on Monday, with analysts expecting it made $3.4 billion in profits in the six months to March.

NAB’s Andrew Irvine is tipped to unveil almost $3.5 billion in half-year profits from the country’s biggest business lender on Wednesday, while ANZ’s Shayne Elliott will deliver the bank’s half-year profits on Thursday, with $3.5 billion expected in earnings. It will be Elliott’s last result as chief executive before handing over to Nuno Matos on May 12.

Macquarie Group chief executive Shemara Wikramanayake will deliver the investment giant’s full-year results on Friday, while CBA, which reports on a different financial calendar to rivals, has a quarterly trading update on May 14.

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