Banks seen as short-term beneficiaries of rising rates: Macquarie

Fri 21 Oct 22, 1:00pm (AEST)
Macquarie and Westpac buildings
Source: iStock

Key Points

  • Macquarie expects the banking sector to perform well throughout the next earnings upgrade cycle
  • Banks have experienced a notable increase in short interest in recent months
  • In order of preference, Macquarie prefers NAB, CBA, ANZ then Westpac

Macquarie says banks should deliver strong margin trends in the near-term, leading to 'meaningful upgrades' over the next twelve months.

"While we do not expect the market to put a high multiple on a margin beat, we expect the sector to perform well throughout the earnings upgrade cycle," Macquarie analysts said in a note on Friday.

"While we expect banks to highlight earning offsets from higher expenses and slower volume growth, we expect margin dynamics to overshadow those themes."

A rise in shorts

Short interest among major ASX-listed banks has increased substantially since the June quarter 2022. Macquarie observed a $2.6bn increase in short interest, rising an average 59 bps to 130 bps.

Commonwealth Bank (ASX: CBA), Virgin Money (ASX: VUK) and ANZ (ASX: ANZ) experienced the largest quarter-on-quarter rise in short interest.

Bendigo Bank (ASX: BEN) and Judo Capital (ASX: JDO) were the only two banks to experience declines in short interest.

Average short interest among major ASX banks
Source: Macquarie Research

"On the technical side, despite ongoing concerns around the highly geared household sector, we see scope for short activity to moderate while the outlook for banks remains favourable and Australia continues to perform relatively well in the global context," they said.

In order of preference within the banking sector, Macquarie prefers NAB, CBA, ANZ and Westpac.

The most recent Macquarie price targets and ratings for the above banks include:

  • NAB: $32.25 and Outperform

  • CBA: $95.00 and Neutral

  • ANZ: $25.50 and Neutral

  • Westpac: $23.50 and Neutral


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Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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