Major Banks: Half Year 2018 Results Analysis | KPMG | AU
close
Share with your friends

Major Australian Banks: Half Year 2018 Results Analysis

Major Banks: Half Year 2018 Results Analysis

Australia's major banks are responding to a challenging new era of industry transformation, reporting a decrease in aggregate profits for the 2018 half year. The majors reported a cash profit after tax of $15.2 billion for the 2018 half year, down 2 percent compared to the first half of 2017.

1000

Also on KPMG.com

Businessman standing at window of high-rise building

While reporting continued improvement in loan impairments and margins, the result indicates the difficult regulatory and operating environment facing the majors, with slowing revenue growth, rising capital levels and increasing legal and remediation costs, as the industry works to restore trust.

Key components of the results

  • In response to regulatory requirements, the increase in banks’ capital levels has continued to compress industry returns. The majors’ returns on equity (ROE) decreased by 78 basis points to an average ROE of 12.9 percent for the half year.
  • Common Equity Tier 1 (CET1) average capital ratio rose by 20 basis points over the half year to an average of 10.5 percent of risk-weighted assets (RWAs), reflecting the impact of increased regulatory capital requirements.
  • Net interest margins are up by 3 basis points compared to the first half of 2017 to 203 basis points (cash basis), primarily due to mortgage and deposit re-pricing offsetting lower earnings on capital markets income and the impact of the Major Bank Levy.
  • The average cost-to-income ratio increased by 265 basis points across the majors to 45.7 percent, attributed to meeting rising regulatory compliance, legal and remediation requirements, as well as restructuring costs and investment in technology.
  • The major banks’ aggregate charge for bad and doubtful debts decreased $431 million to $1.8 billion (statutory basis) for the half year (down 19.5 percent on 1H17), with lower individual provisions.
  • The majors recorded net interest income growth (cash basis), increasing by 5 percent to $31.6 billion for the half year, while non-interest income (cash basis) decreased by 5.8 percent to $11.5 billion, mainly due to one-off asset disposals. Housing credit recorded growth in the half year of 1.8 percent, compared to non-housing credit which only grew by 0.9 percent.

Results snapshot infographic

Connect with us

 

Request for proposal

 

Submit