Since peaking in April 2015, the Australian banks have derated sharply, underperforming the ASX200 and regional indices, given the weight of A$18bn of capital raisings; lacklustre FY15 earnings; a deteriorating macro environment (China faltering, USD rising, bonds rising) which likely heralds the unwind of the long-running Australian bank AUD dividend yield carry trade; and resurfacing fears that the Australian “housing bubble” could collapse (with higher borrowing rates, restrictions on investor lending volumes, tightening credit standards, rising unemployment, slowing immigration, etc). Sub-cycle loan losses and low quality tax items see the banks again overearning by 10% – at some point the non-recurrence of writebacks will be problematic. The one bright spot has been that the bank oligopoly has again used its pricing power to significantly raise housing rates. However, the “stickiness” of repricing remains to be seen and it drags on housing sentiment. Further, super-high housing-product ROEs could yet lure price-competitive disruptors.