A cash rate of around 1 per cent by the middle of next year, which is within conservative forecasts, would be enough to provide banks with near-term margin upside of as much as 12 basis points.

Macquarie Securities has looked at how the major banks’ deposit books will be impacted by rising rates and how the changes will flow through to earnings.

It said that as rates increase, it sees scope for banks to improve the profitability of their savings deposits by 20 to 30 basis points and margin benefits to 6 to 12 bps.

“With increased global uncertainty, we expect stable deposit growth to remain supportive,” Macquarie said.

“We expect deposit competition to return when banks need to refinance their Term Funding Facility allocations. Longer-term, deposits will flow back into term deposits as rates rise and the benefit to bank margins will diminish.”

CBA has the strongest deposit franchise and its growth in low-cost deposits has outstripped its rivals over the past couple of years. 

It increased deposits by 30 per cent since 2019, NAB by 18 per cent, ANZ 16 per cent and Westpac 11 per cent.

ANZ benefits by having a larger deposit book in New Zealand and Asia (predominantly US dollar denominated). This suggests ANZ is more leveraged to NZ dollar and US dollar interest rate movements and will see margin benefits sooner.

Its New Zealand and Asian business should see 5 to 6 bps margin improvement from rising rates.

Earnings impacts are also affected by banks hedging strategies and CBA’s margin benefit will be reduced by its long-dated hedge.

The main margin benefit will be in the 2022/23 financial year, when Westpac will increase margins by as much as 10.9 bps, ANZ and CBA by 10.8 bps and NAB by 9.3 bps.