Australian banks are under increasing pressure to justify their equity valuations as they prepare to report earnings in the face of declining interest rates.

The outlook for the nation's largest lenders appears to be dimming as central banks withdraw their support, raising concerns about the sustainability of this year's stock rally.

Analysts predict a significant drop in the core profit measure, which reflects the spread between loans and deposits, over the next year.

Major players such as Westpac Banking Corp., National Australia Bank Ltd., and ANZ Group Holdings Ltd. are expected to be at the forefront of this trend as they announce their full-year results next week.

The combination of lower interest rates and heightened competition is likely to challenge the profitability of these institutions, which is a crucial moment for investors and stakeholders in the Australian banking sector.