UBS has released its latest global bank survey and Australia now ranks last

(Ezra Shaw / Getty Images)
  • UBS has released the results of its in-house survey of global banking analysts from Q3 2018.
  • Australia’s banking sector was the only region to get a “very cautious” rating, below the “slightly cautious” rating for Italy, while the outlook for Japanese banks improved.
  • In the wake of increasing trade tensions, UBS said a trade war scenario would slow loan growth but the earnings impact should be muted.

  • The global banking team at UBS has released its in-house banking survey for Q3 2018, and respondents took a dim view of Australian banks relative to international peers.

    “By country, we are very cautious only in Australia and slightly cautious in Italy and in the US regionals,” the analysts said.

    “We are slightly bullish in France, Japan, Nordics, Spain, the UK and the US brokers. We are neutral in Benelux (Belgium, Netherlands and Luxembourg), Ireland and the US large caps.”

    Source: UBS

    The Y axis on the above chart shows the outlook for each region on a scale of very cautious (1) to very bullish (5), while the X-axis shows the rate of change since the previous survey.

    So although Brazil’s banking sector has declined the most rapidly since Q2, Australia ranks lowest in terms of the earnings outlook.

    The in-house view from UBS towards Australia is perhaps unsurprising, given the firm’s Sydney-based banking analysts have been relatively pessimistic on the sector for some time.

    Amid a slowdown in Australia’s housing market, UBS analysts have highlighted tighter lending standards as a key factor which will crimp operating margins in the short-to-medium term.

    The latest survey was carried out in the wake of recent trade tensions between the US and China, which have served to weigh on expectations for global growth.

    Despite that, sentiment towards global banks remained “positively skewed”.

    Of those surveyed, 50% took a positive view of the sector on a global level (down from 53% in Q2). The decrease was accompanied by a small rise in respondents with a more cautious view, but it wasn’t a steep change.

    The view towards developed markets was slightly less optimistic. As with the broader global survey, 50% of respondents were positive (down from 54%) while 8% said they were now “very cautious” (up from zero in Q2).

    Source: UBS

    Among developed markets, the outlook for Japanese banks rose after indications the Bank of Japan may be considering a shift in its approach to monetary policy.

    Such a move could “allow a steepening yield curve, which would serve as a major re-rating catalyst for Japanese banks,” UBS said.

    The table below outlines the current UBS view towards banking sectors by region:

    Source: UBS

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