Australia Banking & Financial Services Report Q4 2017
We believe Australian banks are exposed to a significantly overvalued housing market andcontinued reliance on offshore wholesale funding and we therefore hold a negative outlook. With respect toother areas of financial services, insurers face stiff competition while the stock exchange will continue to bedomestically focused, leaving little room for growth, other than the asset management industry, boosted bythe large superannuation fund.
We hold a negative view on Australia's banking sector due to its vulnerability to the overvalued housingmarket particularly in Sydney and Melbourne and its reliance on offshore wholesale funding. A coolingproperty market is likely to act as a drag on credit growth and profitability while funding costs would rise inthe event of global risk aversion.