Why CBA, NAB, Westpac and ANZ rallied as banks posted best session since February
Aussie banks shrugged off a global rout to post their best day since February. BoQ’s margin beat may be the reason why.
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KEY POINTS
- The banks index had its best session since February, rallying 2.9% despite broader market weakness, as BoQ’s FY26 margin beat offered an early read on sector NIMs.
- BoQ’s cash profit fell 7% to $358m, slightly missing estimates as bad debts jumped 157%, but management expects a modest margin uplift in 1H27.
- Banks aren’t cheap. CBA trades on 24x trailing earnings with FY27 profit expected to grow just 0.8%, but beating margin expectations may matter more than growth.
Despite a tech and small-cap selloff on Wall Street, a near 7% slide in the Kospi (down 20% in seven sessions), heavy losses for local miners and tech, and a weaker-than-expected jobs report, Aussie banks just had their best session since February.
The S&P/ASX 200 Banks Index rallied 2.9% to a five-week high, its biggest gain since the day CBA jumped 5.4% on its better-than-expected 1H26 result. Every major finished higher, pulling the sector closer to breakeven for the year.
Ticker | Company | % Chg | Price | 1 Week | YTD |
|---|---|---|---|---|---|
BOQ | Bank Of Queensland | 5.9% | $6.87 | 8.2% | 4.7% |
BEN | Bendigo Bank | 3.8% | $10.62 | 4.6% | 0.3% |
CBA | Commonwealth Bank | 3.3% | $156.15 | 4.0% | -2.8% |
NAB | NAB | 3.0% | $39.71 | 4.1% | -6.1% |
WBC | Westpac | 2.9% | $35.71 | 4.6% | -7.2% |
ANZ | ANZ Group | 1.9% | $39.01 | 3.3% | 7.0% |
JDO | Judo Capital | -0.6% | $0.89 | -0.6% | -50.0% |
MQG | Macquarie Group | -1.2% | $246.68 | -0.3% | 21.5% |
Defensives caught a massive bid, with the S&P/ASX 200 Consumer Staples and Utilities sectors up 3.4% and 2.0% respectively. But the more likely catalyst for the banks was Bank of Queensland’s FY26 result, which lands off cycle as its year ends on 31 August.
Full-year profit came in slightly below Morgan Stanley’s forecasts as bad debts ran higher than expected, but the all-important net interest margins beat.
Net interest margin up 6bps to 1.70% vs 1.68% ests, with 2H26 NIM of 1.73% vs 1.70% ests
Loan impairment expense up 157% to $54m vs $49m ests (10% above)
Cash NPAT excluding one-offs down 7% to $358m vs $362m ests (1% miss)
2H26 cash NPAT excluding one-offs up 3% on 1H26 to $182m vs $186m ests (2% miss)
Final dividend of 20c fully franked plus a 15c special, both in line with ests
FY27 outlook targets flat cost growth, a modest 1H27 NIM uplift and a return to home lending growth, broadly in line with ests
Management was fairly upbeat on the earnings call.
On the 2H26 margin: “Margin increased six basis points to 1.73% in the second half. Lending was a five basis point headwind, with competition remaining elevated... Funding was an 11 basis point benefit, as we transformed our balance sheet and required less funding.”
On the 1H27 outlook: “In the first half, subject to market conditions, we expect a modest uplift in margin.”
On the drivers of that uplift: “The confidence we have in the modest uplift then comes through as a result of the most recent cash rate change that happened in late September... ongoing tailwinds from our replicating portfolio, and the normalisation of liquidity.”
On mortgage applications: “We’ve seen strong mortgage application volumes with a 14% increase in the second half, providing momentum into FY27. While acknowledging this uplift is off a low base, it is a positive indicator of the platform’s capacity to scale.”
The one sour note was the economic outlook. “We think compared to when we were talking to you in April, that the economic outlook has deteriorated,” management said.
Still, banks live and die by net interest margins, and BoQ has given the market an early read on where they’re heading. Cheaper funding more than offset lending competition in the second half, and the September cash rate move should give margins another push in 1H27.
That isn’t to say banks are cheap. CBA trades on a trailing price-to-earnings ratio of 24x with a dividend yield of around 3.2%, and with consensus expecting FY27 earnings to grow just 0.8% to $11.07 billion, a slightly better margin won’t change that picture much. But markets care less about growth than about meeting or beating expectations, and on margins at least, the bar looks clearable.
