The ‘pull-forward’ of superannuation contributions due to the 1 July 2017 rule change is likely to benefit wealth management companies in the upcoming reporting season, says Citi Research.
A note on the upcoming reporting season by Citi Research said wealth managers like AMP, IOOF and Perpetual are likely to have benefited from superannuation changes and rising funds under management.
Wealth management inflows have spiked as Australians rushed to top up their super ahead of contribution cap changes on 1 July 2017, said Citi.
In addition, "supportive markets" have lifted funds under management for wealth managers, the report said.
While the major banks are not due to report in the upcoming season, continued moderation in balance sheet growth, new macro prudential regulations and increased competition will keep revenue growth "muted", said Citi.
"[Banks'] ongoing IT and restructuring spending will keep expense growth similar to revenue growth, so pre-provision earnings growth will again be modest. But credit costs should not rise materially," said the report.
Looking at the entire market, reporting season may not be "too bad", said Citi – with the so-called 'confession season' earlier in the year relatively mild.
"At this stage, only low single digit market earnings growth is forecast for FY18, and the market PE is also lower than it’s been at times in recent years, at around 15.5 times, in the environment of still low interest rates," said the report.
"This is even with business conditions reported as the best since the GFC, and profitability across the market (ROE) not particularly high, having come down in the large sectors (resources, banks, supermarkets, insurance). So earnings could get upgraded."