A looming slowdown in mortgage lending, higher provisions for souring loans, and rising interest rates are darkening the outlook for Australian banks, pushing investors away.
The sector outperformed the broader market in 2025 by roughly double. But since the Iran war and housing tax changes, shares have been under pressure.
Since late February, National Australia Bank is down 23%, Westpac off nearly 14.5%, ANZ lost 11.2%, and Commonwealth Bank dipped 5.6% – making them the worst-performing banking stocks in Asia.
The A$2.4 trillion mortgage market growth is expected to slow to 3%-4% next year from 7.5% now.
Australian banks lack diversified revenue streams. Mortgages account for around 60% of their combined credit books, compared to 40%-50% for global peers.
Banks have begun job cuts and technology changes to reduce costs. Foreign ownership has risen, but investors remain cautious.
