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

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.

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