Major Australian Banks: Full Year 2014 Results Analysis

Major Australian Banks: Full Year 2014 Results Analysis

The Australian major banks (the majors) reported another strong financial result for the 2014 full year, although tensions are rising as a result of the regulatory uncertainty from the Financial System Inquiry, likely future increased impairment charges, as well as structural and technological changes that will significantly impact the industry.

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The majors reported a record cash profit after tax of $28.6 billion for the 2014 full year, up 5.7 percent on 2013, aided by a buoyant housing market, historically low impairments and improved funding conditions.

Key components of the results are:

  • Improving balance sheet growth for the majors, with housing credit growth of 7.2 percent, driven by strong investor-led demand for credit.
  • Continued improvement in asset quality has seen a fall in the major banks’ aggregate charge for bad and doubtful debts to $3.4 billion, down $1.6 billion in 2014.
  • Downward pressure on margins have continued, with the majors recording an average net interest margin of 207 basis points, down 6 basis points on the prior year, arising primarily from the low interest rate environment and competition in lending.
  • Pressure on returns continue, with an average ROE of 15.6 percent for the 2014 full year, compared with 15.9 percent in 2013, reflecting the impact of significantly increased regulatory capital requirements.
  • Low cost-to-income ratios have been preserved as a result of investment in operational efficiency and productivity. The majors recorded an average cost to income ratio of 45.9 percent for the 2014 full year, which remains at the bottom end of international peers.

Download the accompanying Major Banks key statistics and ratios (PDF 113KB).

Major Australian banks' results

KPMG’s Major Australian Banks Results Analysis examines the financial results of the four major Australian banks.

 
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