(Bloomberg) — Perpetual Investment Management Ltd. stock picker Anthony Aboud is putting on an early wager on the benefits of artificial intelligence for Australia’s banks.
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Commonwealth Bank of Australia stands to gain the most among peers, given its track record as an early adopter of technological innovation, he said in an interview in Sydney. AI will help the country’s largest lender cut costs as processes become more automated, he said.
Aboud’s comments reflect how investors everywhere are looking for ways to capitalize on AI, even in markets like Australia, which is dominated by global miners and banks. The savings for CBA may be significant, given how it spent more than A$7 billion ($4.6 billion) on the nation’s biggest banking workforce last fiscal year, according to data compiled by Bloomberg.
“If you were to believe that there would be cost out efficiencies through AI initiatives, CBA has historically been the one bank which could be able to capitalize on that first,” he said. In its February earnings statement, the bank said it’s increasing the use of AI tools for its mobile app and in efforts to train staff and hire engineers.
Banks “could benefit in the next three to five years from artificial intelligence” and should hold up as the Reserve Bank of Australia starts to trim rates from 12-year highs, he said.
His A$2.6 billion Perpetual Industrial Share Fund holds all of the nation’s big-four banks, though it’s underweight on the sector relative to its benchmark, the S&P/ASX 300 Industrials Accumulation Index.
Financials make up a third of the fund, which is up 13% this year, beating 88% of peers, according to data compiled by Bloomberg.
In the near term, Aboud also sees strength among the country’s lenders in the face of monetary policy easing, with traders betting the RBA will start lowering rates in September. The central bank signaled a further shift toward a neutral stance as minutes of its March meeting showed the board didn’t consider the case to raise interest rates for the first time since May 2022.
“Margins will probably stay stable” as rates decline, he said. “The probability of bad debts increasing with lower interest rates is probably lower, so they’ll probably do OK in that environment.”
Local bank chiefs have recently warned of slowing credit growth and cautioned over future profits. CBA’s half-year earnings in February showed margins under pressure from the fiercely contested market for home loans.
The lender’s shares are up 7.4% this year, trailing peers National Australia Bank Ltd., Westpac Banking Corp. and ANZ Group Holdings Ltd.
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