Citi analysts forecast that the full-year results from Australia’s largest bank, Commonwealth Bank of Australia (ASX:CBA), will provide pivotal guidance for the financial sector’s future direction.

They suggest that the recent ebb in mortgage competition on the market, coupled with continuing credit growth evident in the latest data, paradoxically foreshadows a likely fall in CBA’s fourth quarter net interest margin (NIM) of 6 basis points from its third quarter to 1.99%.

This anticipated drop in CBA’s NIM is projected to result from a higher level of mortgage and deposit competition encountered in the third quarter, which is likely to be reflected in the fourth quarter.

Citi proposes that CBA’s position is so influential that the company has the weight to essentially determine sentiment in the sector.

The Commonwealth Bank of Australia is the country’s largest banking institution with substantial influence over Australia’s financial sector.