Anthony Aboud of Perpetual Investment Management Ltd. is placing an early bet on the transformative impact of artificial intelligence (AI) on the banking industry in Australia. He predicts that Commonwealth Bank of Australia (CBA, Financial) will be at the forefront of this technological evolution due to its history of embracing innovation. This shift towards AI could significantly reduce operational costs by streamlining processes.
Aboud's insights highlight the broader investor interest in leveraging AI across various sectors, including the traditionally mining and banking-dominated Australian market. With CBA's expenditure on its workforce exceeding A$7 billion last year, the potential for cost savings through AI is substantial. The bank has already started integrating AI technologies in its mobile applications and is focusing on enhancing its workforce's skills and expanding its engineering team.
According to Aboud, the banking sector could see substantial benefits from AI in the next three to five years, especially as the Reserve Bank of Australia begins to lower interest rates from their current 12-year peaks. He believes that banks are well-positioned to maintain stable margins and manage bad debts effectively in this changing financial landscape.
Despite being underweight in the banking sector compared to the S&P/ASX 300 Industrials Accumulation Index, Aboud's A$2.6 billion Perpetual Industrial Share Fund includes investments in all four of Australia's major banks. The fund has outperformed 88% of its peers this year, with a 13% increase in value.
Aboud also anticipates that Australian banks will continue to perform robustly in the short term, despite predictions of easing monetary policies by September and recent warnings from bank executives about slowing credit growth and profit challenges. CBA, in particular, has experienced pressure on its margins due to the competitive home loan market, yet its shares have seen a 7.4% increase this year.
