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Those in the know are forecasting a slowdown in business activity for Australian banks. This in turn will have an effect on expected banking profitability.
According to revised profit forecasts issued by Goldman Sachs JBWere for the 2010 financial year, National Australia Bank’s is expected to experience a decline in net profit of 0.5 per cent,  while ANZ’ should have a drop of  0.3 per cent, Westpac’s profit is expected to be 0.2 per cent lower while the CBA is expecting to stay at current levels of profitability.
The main reason behind the expected drop in bank earnings is the softening of the global equity markets. This has an unfavorable impact on the  wealth management divisions of Australian banks.
Despite expecting a significant drop in its earnings, NAB is Goldman Sachs JBWere’s preferred exposure to the sector. NAB is trading on a 2011 forecast price earnings multiple of 8.6 times, which is a 19 per cent discount to peers.

Macquarie Research is also expecting a slowdown in the banking sector but for a different reason. Essentially the tightening in business loan regulation will result in businesses looking to reduce their loan exposure and consequently cut prospective bank earnings.