The Commonwealth Bank is expected to highlight the industry's resilience to fragile economic conditions this week, as cheap credit and a resurgent housing market drives profits to new record highs.
The country's biggest bank is tipped to unveil an interim profit of more than $4.1 billion at its half-yearly results on Wednesday, an annual rise of at least 8 per cent.
Analysts predict it will also up interim dividends by 10 per cent to about $1.80, as the sector benefits from stronger credit growth and low levels of loan impairment. The CBA is Australia's largest mortgage lender and a bellwether for the industry, which last year delivered investors blockbuster returns via higher dividends and rapid share price growth.
In recent months, there have been signs households are increasing their borrowing in response to record low interest rates and surging house prices, a trend that should benefit the CBA in particular.
At the same time, analysts believe low interest rates have shielded banks from weakness in the economy, because the low cost of credit means most borrowers are still on top of their debts. Although the unemployment rate has risen to a four-year high of 5.8 per cent, JP Morgan analyst Scott Manning said this was not enough to increase losses from bad loans.
''Unemployment has increased but it's still moderate. Interest rates are still quite low, and this means that people's capacity to repay debt is still quite good,'' Mr Manning said.
Housing credit growth also accelerated to its quickest pace in three years in December - a trend likely to support CBA especially.
''If you look at the proportion of their balance sheet that's in domestic mortgages, it's a lot bigger than ANZ and NAB,'' Mr Manning said.
ANZ Bank will also provide an earnings update on Tuesday, with analysts expecting first-quarter profits of about $1.4 billion. As emerging markets suffer from volatility, a key focus for investors is likely to be its Asia-exposed institutional business.
National Australia Bank will deliver a first-quarter trading update next week - amid signs of improving conditions in Britain, where its banking interests have been a persistent drag on profits.
Last year was a boon for investors in Australia's big banks, which notched up collective profits of $27.4 billion. A key reason for the profit growth was a fall in provisions for bad debts - a trend analysts expect to continue this year, albeit at a slower rate.
Morningstar's head of banking research, David Ellis, said he thought the sector's profit growth this year would slow to between 5 and 7 per cent, in part because bad debts would fall more gradually.
Bank of America Merrill Lynch analyst Andrew Hill told investors a key ''upside risk'' was lower-than-expected bad and doubtful debts.
ANZ, NAB and Westpac will reveal half-yearly results in May.