Slide in Jobless Rate Increases Chances of a Rate Hike, Likely to Benefit Banks

Australia’s unemployment rate unexpectedly fell to 4.1% in December from 4.3% in November. Lower unemployment means people have more income and spending power but it also raises concerns that inflation could accelerate as demand for goods and services increases. In such an environment, interest rates will get a hike which tends to benefit banks and this led to healthy rally in major ASX bank stocks on Thursday.

Commonwealth Bank of Australia (ASX: CBA)

Commonwealth Bank of Australia (ASX: CBA) rose 2.3% on Thursday which is a meaningful move for a company of this size and will also benefit in a rate hike scenario as variable loan rates rise faster than deposits.

The current annual dividend yield stands at 3.22% and unaudited cash NPAT for the September 2025 quarter came in at $2.6 billion which represents a 1% increase over the 2H25 quarterly average.

Total operating income increased by 3% supported by lending growth, stronger household deposits and higher fee volumes while net interest income also rose by 3% although net interest margin narrowed slightly due to higher balances held in lower-yielding liquid assets and institutional repo positions.

Customer growth remained strong as the bank added more than 175,000 new retail transaction accounts during the quarter and recorded deposit growth of $17.8 billion.

Business banking performance also improved as business transaction accounts rose 7% year-on-year and lending growth was supported by demand across multiple industry sectors.

CBA now has a market capitalisation of $252 billion and maintains a very strong balance sheet with a 79% deposit funding ratio, a Liquidity Coverage Ratio of 133% and a Net Stable Funding Ratio of 116% which are all above regulatory requirements.

National Australia Bank Limited (ASX: NAB)

National Australia Bank Limited (ASX: NAB) surged 3% on Thursday and has a current market capitalisation of $130 billion and reported a steady FY25 result as stronger momentum in the second half supported earnings stability.

Cash earnings reached $7.09 billion while underlying profit increased to $10.97 billion which reflects improved revenue performance in 2H FY25 driven by higher lending volumes and improved margins across business and personal banking segments.

The company pays fully franked dividends on a semi-annual basis and the current annual yield stands at an attractive 4%.

NAB is equipped with a CET1 ratio of 11.70% which is above regulatory requirements and provides a strong buffer against economic volatility.

The bank is positioned to perform well in a rising interest rate environment as its strong deposit base supports higher net interest income with lending rates repricing faster than deposit costs.

Asset quality showed early signs of stabilisation in the second half and AI is improving customer experience, productivity and cost efficiency.

(Source: Company Announcements)