ASX 200 bank shares have been somewhat of a mixed bag this year, starting off with a bang before receding back to range.
The benchmark and index funds tracking the sector are also down so far in 2022. The VanEck Australian Banks ETF (ASX: MVB) is down 8% this year to date and around 9.5% in the red for the past 12 months.
Despite the volatility, the banking majors in Australia look well positioned to capitalise on a series of macroeconomic and industry-specific tailwinds, analysts say.
Surging rates: good in the short term for ASX 200 banks
With interest rates now front and centre of the economic landscape, the Australian banking majors have seen a shakeup to their earnings outlook.
The increase in policy rates from the Reserve Bank of Australia (RBA) continues to be passed through to consumers at the retail and commercial levels, with interest rates on both home and business mortgages lifting to multi-year highs.
As such, net interest income (NII) obtained by the sector is set to increase, while the net interest margins (NIMs) on NII will also theoretically grow.
This is also seen on the deposit side too, where the recent spike in rates has been likened to a "sugar hit" by Macquarie analysts. It comes at a time when competition in the mortgage market remains at an all-time high.
Maquarie analysts said in a recent note:
In the short term, banks continue to benefit from highly lucrative retail deposit pricing, which will likely provide margin upside in the next six months.
If we are heading into an environment where credit growth is going to be slow for a long period of time, it does have a substantial impact on the earnings outlook and the valuation of banks.
The market is certainly pricing the effect of changing interest rates into ASX 200 bank shares.
All of the majors are down this year to date and have been tracing sideways for a good portion of a month now.
The below chart tracks the progress of: Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corporation (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and Bendigo and Adelaide Bank Ltd (ASX: BEN).
It remains to be seen if Macquarie's forecast of the short-term impact of rate changes will result in a short-term thrust on the charts.
