Recent major bank financial reporting seen as better than expected by analysts

The recent round of major Australian bank financial results were better than expected, analysts at Macquarie say.

ASB's parent Commonwealth Bank of Australia (CBA) reported half-year results, with ANZ, BNZ's parent National Australia Bank (NAB) and Westpac providing first quarter trading updates.

"The February 2026 results across the major banks were better than expected. Revenues were generally better (+0-4%), with costs inline (-3-0%), and bad and doubtful debts below expectations (-20%-47%), driving solid 4%-11% beats to consensus cash earnings. While some temporary factors contributed to better results [such as] seasonally lower expenses and stronger markets incomes, excluding these, results were still ahead of expectations," Macquarie says.

As a result the firm's analysts say 2026 and 2027 earnings forecasts have been upgraded by between 2% and 5%.

In terms of comparisons, Macquarie's analysts say NAB reported the best results and Westpac the worst, albeit they were still solid.

"Compared via a half-on-half basis of December 2025 versus June 2025, excluding notable items, CBA, NAB and Westpac all saw posted consistent pre-provision operating profit trends (+4.5% - 4.7%). While WESTPAC saw weaker underlying margins trends (-5 basis points vs flat) this was offset by better cost management and stronger loan growth."

Strong organic capital generation means dividends shouldn't be cut and some could be increased, Macquarie says.

"We came into results with a favourable view for the sector and upside to earnings from better volumes and margins. This has played out through consensus earnings upgrades, and while we continue to see the macro-backdrop as favourable (rising rates, solid volumes, and benign credit), our earnings forecasts are no longer materially above consensus," Macquarie's analysts say.

"Still, given strong economic data, earnings risks are skewed positively, with volume growth and the rate environment potentially surprising to the upside. As such, we maintain our neutral sector view for now. We now see downside to ANZ and Westpac earnings, but more balanced risks to CBA and NAB with modest upside in the near term. Despite downside risk to ANZ earnings, due to revenues, we think continued delivery of cost out could support performance in the near term. Our preferred exposure remains NAB."

Macquarie says its results comparison table below shows ANZ and NAB were the clear out performers, led by better than expected cost cutting, and strong markets income respectively.

Morgan Stanley

Analysts at Morgan Stanley expect banks' earnings per share upgrades, strong balance sheet settings and low risk profile will continue to appeal to investors. They note historically a Reserve Bank of Australia interest rate hiking cycle triggers a bank price-to-earnings multiple de-rating, but the recent results are likely to keep trading multiples at elevated levels in the short term.

"However, we believe it is late in the bank outperformance cycle and that the catalysts for a de-rating are more likely to emerge as the year unfolds. These include: downside risks to the economy, loan growth and credit quality from the combination of monetary and fiscal policy pivots; the potential for another outbreak of competition as the five largest banks try to implement their strategies; and the chance of poor execution risk on company specific transformation and productivity agendas."

The Morgan Stanley analysts suggest that without materially higher interest rates, the competitive environment will prevent a significant and sustainable rise in retail bank margins and profitability.

"This reflects our view on several key industry trends: (1) Westpac and ANZ are attempting to arrest a long period of market share loss; (2) CBA's competitors are reinvesting to reinvigorate their proprietary mortgage distribution, and none of the major banks have indicated they are prepared to accept mortgage growth materially below system for sustained periods; (3) third-party brokers will remain customers' preferred distribution channel for new mortgages; (4) major banks will invest more in deposit-gathering capabilities; (5) customers will look for better rates on savings accounts; and (6) Macquarie recently stated that 'over a long time now, we’ve demonstrated our ability to fund our home loan growth with deposits, and we’re confident that we can continue to do so,' suggesting it will continue to price competitively to win more market share in both mortgages and deposits. We expect the influence of these factors to be more meaningful in 2027 than 2026," Morgan Stanley says.

UBS

NAB, CBA, and ANZ surprised financial markets positively, showing earnings momentum, supported by a benign credit cycle, strong lending growth, excluding ANZ, and cost control, UBS analysts say.

"NAB performed well on net profit after tax and pre-provision operating profit from controlled costs, margin resilience and loan growth [with] business +6.5% annualised. CBA's +5% net profit after tax beat came from better than expected average interest earning assets growth despite weaker net interest margin combined with a lower credit charge, still high quality earnings."

"ANZ showed progress on their 2030 strategy, taking out considerable costs and cutting credit charges which saw the share price close +8.5% higher on the day. We expect investors will pivot their focus to ANZ's ability to grow lending, revenues and profitability, seeing cost out now as firmly discounted into the share price, based on our research," UBS says.

Here in New Zealand, both Kiwibank and Heartland Group report interim results on Thursday.