Aussie banks vulnerable to a derating as super funds own 30% of sector: analysts
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The news: The Australian banking sector is vulnerable to a derating if superannuation funds and passive funds fatigue in buying up bank stocks due to their high ownership, according to Morgan Stanley analysts.
The numbers: Morgan Stanley pointed to new data from the Australian Bureau of Statistics (ABS) that showed the super sector had increased its ownership of Australian banks by 50 basis points year over year from 27.9% to 29.7%.
The context: The analysts noted that flows from superannuation net buying have heavily influenced the banking sector's performance and "arguably pushed sector valuation to extremes".
Net purchasing by superannuation has been elevated for much of the 2024 calendar year, the analysts said, while offshore investors and households have been net sellers.
Meanwhile, commentary from the Reserve Bank of Australia and Council of Financial Regulators have flagged potential stability risks linking super ownership of bank equity and debt with a review by the Australian Prudential Regulation Authority slated for next year.
What they said: "Given the valuation stretch in the bank sector any fatigue in flow from what has been the dominant driver this year could be a trigger for multiple derate back to more normal valuation levels," Morgan Stanley's analysts said.
The source: Morgan Stanley research
