Higher interest rates are bad news for many S&P/ASX 200 Index (ASX: XJO) stocks, but they could offer tailwinds for Commonwealth Bank of Australia (ASX: CBA) shares and the other big four Aussie bank stocks.
That's according to the latest Australian Banks report, just out from Macquarie Group Ltd (ASX: MQG).
According to the broker, ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and CBA shares could all enjoy a material uptick in earnings per share (EPS) if the RBA hikes interest rates twice in 2026 rather than cutting once.
Should ASX investors expect RBA interest rate hikes in 2026?
Please don't shoot the messenger.
But, yes, if you're buying ASX stocks, including CBA shares, you should do so with the expectation that the RBA may well transition from cutting interest rates to lifting them next year amid resurgent inflation.
According to Macquarie:
Market expectations for the cash rate have shifted significantly following stronger employment, CPI, and GDP reports which suggest the economy is operating close to its capacity. This has seen pricing for the cash rate by end-26 move from ~1 additional cut (as in our current forecasts) to ~2 hikes.
Citi economist Faraz Syed is among those who are now forecasting two interest rate hikes from Australia's central bank next year.
"We believe a tight labour market, new (higher) inflation forecasts, strong housing and household consumption all point to monetary policy being too accommodative," Syed said (quoted by The Australian Financial Review).
"Therefore, we shift our no policy change view to 50 basis points worth of rate hikes in 2026, starting as early as February, followed by May," he added.
What does this mean for ASX 200 bank stocks like CBA shares?
Macquarie noted that higher interest rates should drive materially higher margins for CBA shares as well as for ANZ, NAB, and Westpac.
The broker added:
Alongside the shift in rate expectations, swap rates have also moved materially higher, with 3 and 5 year swap rates increasing by ~40bps since mid-Nov. This shift in both cash rate expectations and swaps suggest material upside to bank margins if it's sustained.
Macquarie said that some of the benefits the ASX 200 banks receive from higher interest rates would be eroded by increased competition. Though the broker still sees a significant upside to the banks' forecast earnings.
"While we don't expect consensus to fully reflect this potential upside, the shift in the rate outlook does suggest upside to consensus earnings as we approach February results," Macquarie noted. "That said, higher rates also present some downside risk to bank multiples and expectations for the housing market / credit growth."
According to the broker:
Our analysis suggests a 5-10bps upside to our current 2H27 margin forecasts if rates are sustained. However, with a significant share of this likely to be offset by increased competition, we estimate the improvement in margins would be a more modest 3-5bps upside, or 3-6% upside to earnings.
And Macquarie expects that Westpac and CBA shares will benefit more than ANZ and NAB shares if the RBA hikes rates next year.
Macquarie said:
Based on unhedged retail / business transaction deposits we estimate the ~75bps swing in cash rate expectations [from the prior expectations of a 0.25% cut to new expectations of a 0.50% rate hike in 2026] equates to 2-4bps of upside to our margin forecasts across the banks (more for CBA and WBC, and less for ANZ and NAB).
We assume full pass through on savings deposits, but competition could see a more modest impact.
