Big four profits tipped to slide as royal commission bites

“We expect a subdued November reporting season for the major banks, driven by wholesale funding cost pressures impacting margins and one-off customer remediation costs impacting expenses,” said JP Morgan badyst Andrew Triggs.

Although ANZ, Westpac and CBA have raised interest rates in recent months, the impact from these changes will not be included in the results that are due to be published in the coming weeks.

Bell Potter badyst TS Lim said he did not expect any cuts in dividends at this half, but growth would be harder to come by for the big four – making them more like staid utility businesses.

“In a way the banks are becoming more like utilities,” Mr Lim said.

“People expect very little growth in earnings over the next two to three years. Top line growth is probably just going to track GDP,” Mr Lim said.

UBS badyst Jonathan Mott said revenue across the sector was on track to fall by slightly less than 3 per cent, including the impact of compensation. Charges for bad loans would likely be “benign” for the banks, Mr Mott said, but the investor discussion would be dominated by the Hayne royal commission into misconduct in financial services.

“We see little likelihood of (or incentive for) earnings to positively surprise given the Royal Commission and the intense political scrutiny,” Mr Mott wrote.

ANZ, which reports on Wednesday, is forecast to deliver a profit of about $6.2 billion, down slightly on last year’s $6.4 billion, after it announced this month announced a swag of charges for remediation and other impairments. It is forecast to leave its final dividend flat at 80c a share.

National Australia Bank, is also forecast to keep its dividend on hold at 99c a share when it delivers its results on Thursday, with badysts penciling in a cash profit of about $5.7 billion.

Westpac is forecast to deliver a profit of about $8 billion next week, and keep its final dividend unchanged at 94c a share. CBA is expected to deliver a first quarter trading update at its annual general meeting next week.