The outlook for Australia’s banks in 2017 has been made tougher given the rerating of the stocks this last quarter. The expectations built into share prices have clearly lifted in 2017, the big change we expect is a slowing of loan book growth, as we’ve already started seeing in recent data. If interest rates have bottomed, affordability of debt, which has been driving excess nominal GDP growth, will suffer. Market expectations imply a continuation of the growth rates we’ve seen over the past decade or two, but if the cost of debt stops falling this could act as a drag on loan book growth and the broader economy. Funding costs continue to rise, pressuring net interest margins. Slowing loan book growth is also likely to increase competitive pressure as banks look to gain share as an offset.