Many S&P/ASX 200 Index (ASX: XJO) bank shares have been on a roll lately as higher interest rates have seen net interest margins (NIMs), and thereby profits, increasing.
However, the party could be coming to an abrupt end, according to Macquarie experts.
They're said to have tipped inflation and continuously high rates to decrease the value of banks' portfolios and risk greater impairments while higher wages could dint their bottom lines.
What might that mean for ASX 200 bank shares? Let's take a look
ASX 200 banks downgraded amid earnings concerns
Macquaire has lowered its expectations for bank shares, dropping its outlook for the Aussie sector to underweight and slashing its price targets for some ASX 200 giants, The Australian reports.
Analyst Victor German is said to expect banking favourites to post their strongest pre-provision profit growth in a decade. However, that's already priced into bank shares.
Meanwhile, the second half of 2023 isn't looking all that positive. The expert said, courtesy of the publication:
[W]ith meaningful downside risk to consensus expectations in 2024, we expect banks to underperform the market throughout 2023.
German flags banks' expenses could begin to outweigh revenues from financial year 2024 – a mark of inflation driving wages higher. He continued, per The Australian:
We see risk to consensus expectations, and while our FY24 cost forecasts are above market, we may still not be conservative enough. On the revenue side, once rate benefits flow through, volume growth will likely lag inflation, given falling asset prices and reduced credit availability.
Though, not all is dire.
Macquarie has reportedly raised its expectations for ANZ Group Holdings Ltd (ASX: ANZ) shares to outperform. It's kept its price target at $26 – a potential 4.5% upside.
On the other hand, it's said to have slapped underperform ratings on Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), and Bank of Queensland Ltd (ASX: BOQ).
CBA shares are said to have been tipped to fall 13.6% to $94. Meanwhile, those of Westpac and Bank of Queensland are expected to drop 1.7% and 2.9% to $23.50 and $6.75 respectively.
