AUS
NZ
UK
CA
USA
IND
Highlights
- Australian banks' earnings may benefit from solid lending growth.
- November’s 0.6% rise in lending sets a positive trend for 2025.
- UBS analysts predict positive earnings revisions across the sector.
Australian banks could experience a boost in earnings for the upcoming year, thanks to consistent lending growth, which has fueled optimism for the sector in 2025. According to UBS analysts, led by John Storey, lending growth is expected to remain a key driver of positive earnings revisions for Australian banks in 2025.
In November, lending across the sector rose 0.6% from the previous month, reflecting healthy growth in both household and business loans. This sector-wide increase in lending could pave the way for stronger earnings for the banks as more customers seek credit and manage their financial needs. The combination of increased demand for home and business loans signals that Australia’s financial system is on track for continued recovery and expansion.
Credit growth, measured on an annual basis, has been particularly strong, with lending increasing by 5.5% when compared to last year. This substantial growth surpasses earlier expectations, suggesting that banks have a growing potential to improve their financial outlooks for 2025. As household and business sectors see more activity, banks could potentially revise their earnings forecasts upward.
UBS suggests that this growth in lending is a crucial factor to monitor, as it directly affects earnings per share (EPS) for the Australian banking sector. The positive trends observed in lending give a hopeful signal that many banks, including heavyweights like (ASX:CBA) Commonwealth Bank of Australia, (ASX:WBC) Westpac Banking Corporation, and (ASX:ANZ) ANZ Group, may see favorable revisions to their earnings predictions in 2025.
This growth pattern in lending, if sustained, could lead to higher profitability for Australian banks. Given the influence of lending trends on the banking sector’s financial health, investors are keenly watching how these patterns develop throughout the next few months.
For (ASX:XRO) Xero and (ASX:GMG) Goodman Group, companies within the broader economic spectrum, maintaining an eye on the banking sector's performance could offer valuable insight into the broader recovery of the Australian economy in the year ahead. With lending continuing to grow at an above-expectation pace, 2025 holds promise for favorable shifts across the banking landscape.
As lending trends continue to rise, Australian banks are positioned for possible positive revisions to their earnings outlooks in the coming year, setting a solid foundation for growth in 2025.
