CommBank To Benefit From RBA’s Decision

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By Rudi Filapek-Vandyck

Australian banks and the sudden interest rate hike, take 24: Macquarie analysts point out today that, contrary to investors’ usual knee jerk reflex, rising interest rates are actually beneficial for banks.

Over the medium term, the analysts explain, rate rises benefit Australian banks as they are heavily deposit funded and banks typically do not increase the interest paid on deposits as much (or as quickly) as the rate rises they pass on to borrowers.

Conclusion: rising interest rates improve the profitability of deposit balances.

Question: who has Australia’s largest base of consumer deposits?

Commonwealth Bank (CBA), yes.

Macquarie rates CBA Outperform with a twelve month price target of $47.60.

No changes to forecasts were made following yesterday’s RBA decision.

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