Aust banks face weaker outlook

Weakening consumer confidence poses risk to run of profits.

Australia's banks may have emerged from the global financial crisis with barely a scratch, but their latest bumper profits shouldn't necessarily be taken as a sign that all is well down under. 

The biggest danger for the likes of Commonwealth Bank of Australia (CBA) and Westpac Banking Corp is sinking consumer confidence as the country's decade-long mining boom cools and amid signs of a further slowdown in China, Australia's biggest trading partner. 

Such fears have made the nation's traditionally conservative bank customers even more likely to hoard their cash, and less willing to take out loans--even after the central bank cut interest rates to a fresh record low of 2.5% this month. 

That doesn't bode well for the so-called big-four lenders--including Australia & New Zealand Banking Group Ltd (ANZ) and National Australia Bank Ltd (NAB), whose earnings growth now relies on people having the confidence to borrow more aggressively. 

"It's going to get tougher from here," BT Investment Management banking analyst Graeme Petroni said.

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