Major Australian Banks: Full Year 2015 Results Analysis

Major Australian Banks: Full Year 2015 Results Analysis

The Australian major banks reported combined cash earnings of $30.0 billion, an increase of 5.4 percent from last year, but return to shareholders is down as the banks face an accelerating pace of change and compounding challenges.

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Major Australian Banks: Full Year 2015 Results Summary

Revenue and margin headwinds, rising costs and capital levels, and a deteriorating credit quality outlook all mean the majors will face significant challenges in the year ahead.

Key components of the results

  • Return on Equity is down from 15.5% to 15.0%, with this downward trend likely to continue as banks continue to increase their capital levels over the years ahead. 
  • Capital raising initiatives to comply with APRA’s revised guidelines have seen the Common Equity Tier 1 (CET1) average capital ratio increase to 9.6%, up 68 basis points. 
  • Net interest margins are continuing to contract to a record low 2.02%, down 5 basis points from last year, reflecting strong competition for new lending. 
  • The average cost to income ratio decreased to 45.3% from 45.6% in 2014, but banks will need to fundamentally change their operating models to enhance the customer experience, while at the same time, significantly reducing their cost base going forward. 
  • The major banks’ aggregate charges for bad and doubtful debts increased by $363m to $3,764m this year. It is likely we have now seen the bottoming of the credit loss cycle, and the trend in lending losses is now on an upward trajectory.

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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