Australian banks to underperform in 2025: UBS
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The news: Australian banks are expected to underperform in 2025, with shares forecast to retreat over 5% during the year, according to UBS.
The numbers: UBS analysts noted that despite a 79-basis-point contraction in return on equity and a 5% year-on-year decline in FY24 cash earnings, Australian banking shares strongly outperformed the market by around 20%.
However, UBS sees a "mixed outlook" for the sector in 2025 with "selective opportunities". While the global bank total return forecast for the year is 11%, Australian banks are expected to underperform.
The analysts forecast a 5.3% loss for Australian banks, with ASX 200 forecast to return around 5%.
The context: The analysts flagged that Westpac, recently upgraded by UBS to a 'buy' rating, presents the best opportunity in 2025.
The big four lender has opportunity for cost-out initiatives and low balance sheet leverage, they said, and has potential for stronger-than-expected capital returns.
The source: UBS research
