Australia’s four largest banks are well-equipped to navigate macroeconomic challenges over the next two years, including slower economic growth and geopolitical risks, according to Fitch Ratings.
The agency noted that all four lenders maintain stable outlooks and demonstrate stronger earnings metrics compared to peers, based on their current ratings.
Fitch projects a modest uplift in bank earnings in 2026, supported by higher interest rates. However, it cautioned that increased competition and rising costs could offset some of these gains.
At the same time, elevated interest rates, cost-of-living pressures, and a slight rise in unemployment expected in 2026 may lead to a gradual increase in stage 3 loans by 2027.
Stage 3 loans refer to credit-impaired exposures where the risk of default has significantly increased, as defined by the Bank for International Settlements (BIS).
Fitch also warned that an extended conflict in the Middle East could amplify indirect economic impacts, potentially weakening the banks’ financial performance beyond its current base-case assumptions.
Nonetheless, the agency highlighted that the banks’ collateral positions remain robust, underpinned by tighter mortgage underwriting standards implemented since the mid-2010s.
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