Australian firms face earnings test after RBA keeps rate at 12-year high

COMMONWEALTH Bank of Australia, Wesfarmers and Telstra Group will offer a broad snapshot of how Australian companies are faring in an environment of high interest rates when they report earnings.

The Reserve Bank of Australia left interest rates at a 12-year high and governor Michele Bullock said the central bank had not ruled out another rate hike, at a time when markets are betting on when monetary easing would kick off. Shares of local lenders have rallied in the past three months in anticipation of easing that now looks less imminent. 

Further stock gains may be difficult given weak underlying profitability trends, analysts including Citi’s Brendan Sproules said. Higher impairment costs and expenses will hurt Australian banks’ earnings this reporting season, according to Bloomberg Intelligence’s Matt Ingram. Some similar concerns over banking sector profitability amid high rates have been seen as Indian banks reported in recent weeks. 

Interest rates also held back retail and mining conglomerate Wesfarmers as consumers remained wary about big ticket purchases and renovation, BI said. Telstra should show it can fend off competition and increase mobile revenue going forward, helped by international roaming and overseas expansion. 

In Japan, Sony Group Corp.’s higher music and movie business earnings partly offset a drop in the game unit’s operating profit from a year earlier. Any comments on its India strategy will be of interest after it called off a US$10 billion merger with Zee Entertainment Enterprises. Persistent losses in the mobile unit remained a drag on Rakuten Group’s earnings. 

In Thailand, the post-pandemic travel recovery should boost Airports of Thailand PCL’s first-quarter earnings, while lower energy prices probably helped Gulf Energy Development PCL’s earnings improve sequentially. BLOOMBERG

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