CBA leads big bank slump on fears budget changes will hit home loans

Shares in Australia’s major banks experienced significant declines following the federal budget’s announcement of changes to negative gearing and capital gains tax rules, which analysts warn will dampen housing credit growth. Commonwealth Bank (CBA) shares fell sharply by 10.5 per cent, wiping $30 billion off its market value, after releasing a quarterly earnings report that fell short of expectations. Other big banks also saw share price drops: Westpac declined 3.9 per cent, ANZ lost 2.5 per cent, and National Australia Bank fell 1.9 per cent. The budget measures, aimed at limiting tax concessions to newly built properties, have raised concerns about softer mortgage growth and weaker housing market sentiment. The housing sector is a critical driver of lending for Australian banks, with CBA and Westpac being the largest mortgage lenders. Morgan Stanley analyst Richard Wiles highlighted that the tax changes could undermine the long-standing housing “super-cycle” fueled by favorable tax treatment over the past three decades. The reduction in incentives for property investors is expected to reduce demand for investment properties, creating a headwind for mortgage growth and bank profits. This sentiment was echoed by Macquarie analysts, who forecast slower house price and credit growth, potentially weighing on bank earnings and share valuations. CBA’s quarterly profit of $2.7 billion, although 4 per cent higher than the previous year, missed market forecasts and was accompanied by a $200 million increase in provisions for bad debts. This move reflects growing economic risks from rising inflation and geopolitical tensions, notably the ongoing conflict in the Middle East. Citi analyst Thomas Strong noted that the combination of weaker-than-expected earnings and the budget’s negative impact on housing sentiment contributed to the poor market reception. The broader market also faced pressure, with technology stocks among the biggest decliners on the ASX. A selloff in chipmakers and concerns over US inflation data related to energy disruptions further weighed on investor confidence. Shares of WiseTech Global dropped 4 per cent, falling below Xero’s market value, while other tech firms like Technology One and Next DC also experienced declines. The ongoing geopolitical uncertainty and economic challenges continue to influence market dynamics across sectors.