Major Australian Banks: Full Year 2018 Results Analysis | KPMG | AU
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Major Australian Banks: Full Year 2018 Results Analysis

Major Australian Banks: Full Year 2018 Results Analysis

We analyse the four major Australian banks’ full year financial results for 2018.

We analyse the four major Australian banks’ full year financial results for 2018.

Australian major banks have reported a decrease in aggregate cash profits for the 2018 full year, as they restructure and simplify their business models in order to regain trust and position for a more challenging operating environment. The majors reported a cash profit after tax from continuing operations of $29.5 billion for the 2018 full year, down 5.5 percent (compared to 2017).

The result underscores a challenging regulatory and operating environment for the majors. They face slowing revenue growth, rising capital levels and increasing legal and remediation costs – at the same time as the industry works to rebuild trust with stakeholders.

Key highlights of the results

  • The majors reported a cash profit after tax from continuing operations of $29.5 billion for the full year, down 5.5 percent (compared to 2017), driven by lower non-interest income and higher restructuring and regulatory costs.
  • The majors recorded an average net interest margin of 200 basis points (cash basis), down 1 basis point compared to 2017, primarily due to mortgage and deposit re-pricing offsetting lower earnings on capital, market’s income and the impact of the Major Bank Levy.
  • The majors recorded net interest income growth (cash basis), increasing by 2.2 percent to $62.7 billion for the full year; while non-interest income (cash basis) decreased by 3.7 percent to $22.4 billion, due to asset disposals, the removal of certain fees (e.g. ATMs), customer redress and other regulatory changes (e.g. inter-change fees). Housing credit recorded credit growth in the full year of 3.3 percent, compared to non-housing credit which grew by 2.9 percent.
  • The majors' aggregate charge for bad and doubtful debts decreased by $702 million to $3.3 billion (statutory basis) for the full year (down 17.7 percent on 2017), with lower individual credit impairment charges, partly offset by an increase in collective provisions for some of the major banks.
  • The majors' capital position continued to rise, with their average Common Equity Tier 1 (CET1) capital ratio rising by 25 basis points over the full year to an average of 10.6 percent of risk-weighted assets (RWAs), reflecting the impact of increased regulatory capital requirements.
  • Slowing revenue growth, rising operating expenses and regulatory capital requirements continue to compress industry returns. The majors’ returns on equity (ROE) decreased by 134 basis points to an average ROE of 12.5 percent for the full year.
  • The average cost-to-income ratio increased by 356 basis points across the majors to 46.6 percent, attributed to meeting rising regulatory compliance, legal and remediation requirements, as well as restructuring.


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