Morgan Stanley: Australian bank valuation multiples are expected to continue declining, industry remains cautious
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(1) Morgan Stanley analysts have warned that the valuation multiples of Australia's four major banks (Commonwealth Bank, Westpac, National Australia Bank, and ANZ Bank) are expected to continue declining. (2) As of the end of May, the average multiple of the four major banks had fallen to 18.5 times 12-month forward earnings, down from 19.2 times a month earlier. Rising interest rates, an economic slowdown, and changes to property-related tax incentives are expected to negatively impact credit demand and lead to further valuation downgrades. (3) The analysts indicated that Westpac and National Australia Bank are the most vulnerable in the short term, prompting a cautious stance on the banking sector at the industry level.
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