Bank shares hit as negative gearing changes threaten to smash mortgage growth
Negative gearing changes are set to test the big banks, with analysts warning mortgage growth and margins could come under pressure.
The federal government’s changes to negative gearing look set to hit bank earnings growth and squeeze margins, with analysts warning the proposed tax reform will slash the number of property investors in the market.
Commonwealth Bank shares fell around 8.5% in early trading on Wednesday after the bank delivered a flat March-quarter update. The update came the morning after Treasurer Jim Chalmers announced negative gearing would be scrapped for existing properties, while existing concessions for investors would be grandfathered.
Jarden bank analyst Matthew Wilson expects the changes to cut housing credit growth by 25% as the key investor incentive is removed, leaving CBA — which has the largest investor loan book in the country — looking the most exposed.
“Investors have been a very lucrative part of home loan growth for the banks with interest-only loans having wider spread, typically better asset quality through time, and therefore higher return on equity,” Wilson told Capital Brief.
