Australia Big Four Banks: Resilient Credit Profiles Amid Moderate Loan Growth, Offering 6.6%–6.8%

Overview

Australia’s banking sector is dominated by the “Big Four” banks: Commonwealth Bank of Australia (CBA), Westpac Banking Corporation (WBC), National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ). As of 31 August 2026, the four banks collectively accounted for around 70% of the Australian banking market, with combined loan portfolio exceeding AUD4.2 trillion, compared with approximately AUD5.9 trillion for the national banking system, as shown in Table 1.

Table 1: Big Four Banks’ Market Capitalisation and Loan Portfolio

	CBA	WBC	NAB	ANZ
Market Capitalisation (AUD $Billion)	251	118	116	112
Loan Portfolio (AUD $Billion)	1,260	1,160	992	766
Source: Savings.com.au, iFAST Compilations. Data as of 30 September 2026

Australia Mortgage Market

In our view, Australian housing prices are more likely to moderate gradually rather than experience a significant downturn, while the expected slowdown should be viewed as a moderation in housing lending growth rather than a deterioration in credit quality, supported by:

1. Housing activity is moderating as elevated interest rates, upcoming property tax reform weaker buyer sentiment weigh on new lending and property prices, particularly in Sydney and Melbourne.
2. Structural housing undersupply and population growth should continue to provide underlying support for housing demand and prices, despite weaker near-term borrowing demand.
3. The Big Four banks remain well buffered against housing downside, with average mortgage LTVs below their five-year averages and relatively limited exposure to high-LTV mortgages.
4. Variable-rate mortgages support bank earnings resilience, as most outstanding mortgages can be repriced as interest rates change. However, prolonged high rates continue to place pressure on borrowers and could weigh on loan growth.
5. Resilient household and labour market fundamentals should support mortgage repayment capacity, with unemployment remaining relatively low and mortgage arrears and non-performing loans showing improvement.

Overall, while we expect weaker housing activity and softer property prices to weigh on mortgage lending growth in the near term, structural housing shortages, resilient household fundamentals, strong borrower equity buffers and contained asset quality deterioration should help limit risks to the Big Four banks.

At the same time, the predominantly variable-rate mortgage structure allows banks to reprice a large portion of their housing loan books as interest rates change, providing support for overall lending income and earnings resilience despite slower loan growth.

Related article

Australia Housing Market Moderates but Structural Support and Strong Mortgage Buffers Limit Downside

Commonwealth Bank of Australia (CBA)

CBA delivered resilient performance in 3Q26 (March 26), with operating income remaining broadly flat as lending and deposit volume growth offset the impact of two fewer trading days, while net interest margin remained broadly stable.

CBA’s asset quality remained resilient in 3Q26, with the Corporate Troublesome and Non-Performing Exposures (TNPE) ratio increasing slightly to 0.94% in 3Q26 from 0.90% in 1HFY26, primarily due to single-name exposures, but remaining at a manageable level.

Capital and liquidity positions remained resilience. CBA reported a Common Equity Tier 1 (CET1) ratio of 11.6%, comfortably above APRA’s minimum regulatory requirement of 10.25%. Liquidity remained resilience, with a Liquidity Coverage Ratio (LCR) of 133% and a Net Stable Funding Ratio (NSFR) of 116%, both comfortably above the regulatory minimum of 100%.

Related article

Credit Update 3Q26: CBA – Strong and Resilient Credit Fundamentals with Bond Yields of 5.1%–6.2%

Westpac Banking Corporation (WBC)

WBC delivered resilient performance in 3Q26 (June 26), supported by continued loan expansion. Gross loans and acceptances rose by 7.3% YoY, while average interest-earning assets grew by 5.5% YoY, reflecting sustained lending momentum.

However, net interest margin (NIM) declined by 10bps to 1.89%, primarily driven by tighter spreads amid intense lending competition. This decline was offset by asset growth, keeping net interest income flat at AUD 5.0 billion, while non-interest income remained stable at AUD 0.7 billion.

WBC Asset quality remained resilient in 3Q26, with the non-performing loan (NPL) ratio improving to 1.10% from 1.21% in 3Q25. This was supported by a decline in 90+ day delinquencies to 0.58% from 0.75% over the same period, indicating improved borrower repayment capacity. Meanwhile, 86% of mortgage accounts were ahead on repayments, highlighting continued resilience in the mortgage portfolio.

WBC’s capital and liquidity positions remained resilience in 3Q26. The Common Equity Tier 1 (CET1) ratio has slightly to 12.1%, well above the minimum regulatory requirement of 10.25% and the bank’s post-dividend operating target of above 11.25%. Liquidity metrics also remained resilient, with the Net Stable Funding Ratio (NSFR) at 112% and the Liquidity Coverage Ratio (LCR) at 132%, both well above regulatory minimum regulatory requirement of 100%. In addition, the bank maintained a substantial LCR surplus of approximately AUD $45 billion, providing a strong liquidity buffer against potential market stress and funding volatility.

Related article

Westpac 3Q26: Strong Credit Profile Supports Resilience Amid Growth Moderation

National Australia Bank (NAB)

NAB delivered a stable performance in 3Q26 (June 2026), supported by continued loan growth. Gross loans and acceptances increased by 6% YoY to AUD 817.4 billion, reflecting sustained lending momentum. Net interest margin (NIM) edged up slightly to 1.79%, supporting a 4% YoY increase in net interest income to AUD 4.6 billion.

Meanwhile, non-interest income increased by 13% YoY to AUD 0.9 billion. Overall revenue growth was supported by volume growth and well-managed deposit margins, which helped mitigate softer Markets & Treasury (M&T) performance.

Asset quality remained resilient in 3Q26, with the non-performing exposure (NPL) ratio improving to 1.50% from 1.54% in 3Q25. This was supported by a 3 bps decline in the ratio of impaired assets to gross loans and acceptances (GLAs), reflecting improved outcomes across the Australian and New Zealand business lending portfolios.

NAB’s capital and liquidity positions remained resilience in 3Q26. The Common Equity Tier 1 (CET1) ratio increased to 11.93% as of June 2026, well above the minimum regulatory requirement of 10.25% and the bank’s post-dividend operating target of above 11.25%.  Liquidity metrics remained strong, with the quarterly average Liquidity Coverage Ratio (LCR) at 134% and the Net Stable Funding Ratio (NSFR) at 115%, both well above the regulatory minimum requirement of 100% In addition, the bank maintained a substantial LCR surplus of approximately AUD $53.8 billion in excess liquid assets, providing a strong liquidity buffer against potential market stress and funding volatility.

Related article

NAB 3Q26: Strong Credit Profile Supports Resilience Amid Growth Moderation

Australia and New Zealand Banking Group (ANZ)

ANZ delivered a stableperformance in 3Q26 (June 2026), supported by stable lending and deposit growth. Net loans and advances remained broadly unchanged at AUD846 billion, while customer deposits increased by 1% YoY to AUD786 billion.

Net interest margin (NIM) edged up by 1 bps to 1.54% from the 1H26 average of 1.53%, while operating income declined by 1% YoY to AUD5.61 billion mainly due to driven by foreign exchange translation.

Asset quality remained resilient in 3Q26, with the non-performing exposure (NPL) ratio improving to 0.55% from 0.77% in 3Q25. The improvement was supported by lower watch and control list exposures and a low individual provision loss rate of 3 bps, indicating continued resilience in ANZ’s lending portfolio.

ANZ’s capital and liquidity positions remained resilience in 3Q26. The Common Equity Tier 1 (CET1) ratio increased to 12.51% as of June 2026, well above the minimum regulatory requirement of 10.25%. Liquidity metrics remained strong, with the quarterly average Liquidity Coverage Ratio (LCR) at 131% and the Net Stable Funding Ratio (NSFR) at 113%, both well above the regulatory minimum requirement of 100%.

Related article

ANZ 3Q26: Strong Credit Profile Supports Resilience Amid Growth Moderation

Capital and liquidity Comparison - Big 4 Australian Banks

Overall, the Big Four Australian banks continue to maintain strong credit fundamentals, supported by robust capital and liquidity buffers. CBA and ANZ stand out for their strong capital positions, with CET1 ratios of 11.4% and 12.51%, respectively, providing comfortable buffers above the 10.25% regulatory minimum. Meanwhile, CBA and NAB demonstrate relatively stronger liquidity and funding profiles, with NSFRs of 116% and 115%, respectively, reflecting stable funding positions. All four banks reported LCRs comfortably above the 100% regulatory requirement, indicating ample high-quality liquid assets to withstand short-term funding stress.

Table 2: Capital and liquidity Peer Comparison

	CBA	WBC	NAB	ANZ
Common Equity Tier 1 Ratio (CET1)*	11.4%	12.1%	11.93%	12.51%
CET1 Above Minimum Requirement	+1.35%	+1.85%	+1.68%	+2.26%
Net Stable Funding Ratio (NSFR)**	116%	112%	115%	113%
Liquidity Coverage Ratio (LCR)**	133%	132%	134%	131%
* CET 1 minimum regulatory requirement is 10.25% ** NSFR and LCR minimum regulatory requirement is 100% Source: Company report, iFAST compilations. Data as of 31 March 2026 and 30 June 2026

Recommendation

Overall, Australia’s Big Four banks—CBA, WBC, NAB and ANZ—remain well positioned in the banking and mortgage markets, underpinned by resilient asset quality, resilience capital and liquidity buffers. While ongoing property tax reform, elevated domestic interest rate could weigh on earnings momentum, prudent credit risk management and solid balance sheets should provide a buffer against potential deterioration in asset quality.

The Reserve Bank of Australia (RBA) has raised interest rates four times in 2026 (February, March, May and September), bringing the cash rate to 4.60%, while not ruling out one more potential rate hike if the inflation remain sticky. Nonetheless, rates appear to be approaching the terminal level, the current environment may provide an attractive opportunity for investors to nibble into the relatively higher yields, while remaining mindful that long-end yields could still face upward pressure from global term premium repricing

For investors seeking higher returns and willing to accept moderately higher credit risk, AUD-denominated subordinated Tier 2 bonds issued by the Australian Big Four banks may offer attractive value opportunities, with yields currently above 6% (Table 2).

Table 2: Long Term AUD Tier 2 bonds

Bond name	Ask Price	Year to Call/Maturity	Yield to Call/Maturity	Min / Sub investment amount	Credit Rating (Fitch)
CBAAU 6.152% 27Nov2039 Corp (AUD)	96.531	8.1/13.1	6.7%/6.6%	AUD200,000/10,000	A
WSTP 5.815% 04Jun2040 Corp (AUD)	93.345	8.7/13.7	6.8%/6.7%	AUD10,000/10,000	A-
NAB 6.558% 12May2041 Corp (AUD)	98.050	9.6/14.6	6.8%/6.7%	AUD1,000/1,000	A-
ANZ 6.124% 25Jul2039 Corp (AUD)	96.800	7.8/12.8	6.6%/6.6%	AUD1,000/1,000	A-
Source: Bondsupermart, iFAST Compilations. Data as of 8 October 2026

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in ANZ 6.124% 25Jul2039 Corp (AUD), WSTP 5.815% 04Jun2040 Corp (AUD), and NAB 6.558% 12May2041 Corp (AUD). The analyst who produced this report holds NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.