Australian Banks Feel Pinch of Rising Rates Amid Inflation Surprise

Australian inflation data for July has sparked a fresh focus on higher interest rates and their impact on big bank stocks. The Reserve Bank of Australia's policy expectations have shifted quickly, causing bank earnings, dividends, and share prices to react in different ways than the wider market.

Three large Australian banks - ANZ Group Holdings (ASX:ANZ), Bendigo and Adelaide Bank (ASX:BEN), and National Australia Bank (ASX:NAB) - are exposed to this macro shock. These banks earn most of their income from lending, interest spreads, and deposit margins.

ANZ Group Holdings has the largest market cap at A$111.6 billion, followed by National Australia Bank at A$118.0 billion. Both ANZ and NAB have seen recent declines in earnings, but they could benefit from higher rates widening their net interest income.