KPMG’s Australian Major Banks Half Year 2024 Results Analysis finds that the Majors reported a combined profit after tax of $15.0 billion, down 10.5 percent compared to the first half of 2023, and an average of 0.3 percent from $15.1 billion for the second half of FY23.
Steve Jackson, Head of Banking & Capital Markets, KPMG Australia commented: “FY23 was very much a year of two halves, with a record first half profit performance and a softer second half. The Majors’ performance has stabilised in 1H24 in line with the 2H23 position. Profits have come off from the highs of 1H23, but income is broadly flat, the pace of margin erosion has slowed and operating expenses have reduced modestly compared to 2H23.”
Total operating income in 1H24 is broadly flat on the 2H23 result, decreasing by 0.02 percent to $44.5 billion. This follows a record 1H23 income performance of $45.7 billion. Despite an increase in interest-earning assets of 1.9 percent, total net interest income decreased by 0.5 percent compared with 2H23 to $36.8 billion. This was due to further margin erosion, although at a slower pace than 2H23, driven by continued strong competition within the mortgage market and increased costs of deposit funding.
Average Net Interest Margin (NIM) was 179 basis points during 1H24, a decrease of 11 basis points from 1H23 and 5 basis points from 2H23.
The Majors all cited strong competition as a key driver of margin pressure, including other ADIs acquiring market share and non-traditional lenders entering the market. The combined household lending market share of the Majors decreased by 0.4 percent over the last 12 months, consistent with the decrease of 4.1 percent since mid-2019.
Kim Lawry, Banking Partner, KPMG Australia said: “Despite continued strong competition in the mortgage market and higher fundings costs, the compression of net interest margins for the Majors has moderated in the first half of the financial year.”
Operating expenses, which were rising in FY23, have turned a corner and reduced modestly in 1H24 by 1.0 percent compared to 2H23. The average cost to income ratio in 1H24 is 48.7% which is a reduction of 40 basis points on 2H23, although still 348 basis points above 1H23 levels. Personnel remains the largest contributor to operating expenses, and over the past 12 months the Majors have reduced total headcount by approximately 0.5 percent with personnel expenses down 0.3 percent compared with 2H23.
The Majors booked $1.21 billion in impairment charges in 1H24, approximately 13 percent lower than over the past 12 months. Over the first half, the average provisions as a percentage of gross loans and advances remained steady at 0.68%. Total impaired loans have increased by 2.2 percent across the Majors in the last 12 months, although this is in the context of continued overall portfolio growth.
Capital and liquidity ratios across the Majors remain well above regulatory minimums, demonstrating balance sheet and liquidity strength. The average Liquidity Coverage Ratio (LCR) increased to 135.3%, up 1 percentage point from 2H23 and the average
CET1 ratio is 12.6%, an increase of 10 basis points compared with 2H23.
The Majors declared higher interim dividend payments in 1H24 with an increase in the average interim dividend per share of 2.9 percent compared to 1H23.
Maria Trinci, Banking Partner, KPMG Australia commented: “These results demonstrate the continued strength of the Majors, maintaining asset base growth, healthy capital and liquidity positions and with credit quality continuing to show no significant signs of stress.”
Key highlights of the results are as follows:
- The Majors reported a combined profit after tax of $15.0 billion, down 10.5 percent compared to the first half of 2023, and an average of 0.3 percent from $15.1 billion for the second half of FY23.
- Average net interest margin for the Major Banks was 179 basis points, a decrease of 11 basis points from 1H23, and 5 basis points from 2H23 driven by the continued impact of competition.
- The average cost to income ratio of 48.7% increased by 348 basis points from 1H23, however improved by 40 basis points from 2H23. These movements are consistent with the respective changes in total operating expenses over the same periods.
- Average provisions as a percentage of Gross Loans and Advances remained steady at 0.68% which is indicative of the continued strength of the Majors’ portfolio credit quality.
- The average Liquidity Coverage Ratio (LCR) increased to 135.3%, up 100 basis points from 2H23. The average CET1 ratio across the four banks has increased by 10 basis points to 12.6% from 2H23.
- The Majors declared higher interim dividend payments in 1H24 with an increase in the average interim dividend per share of 2.9 percent compared to 1H23.
For further information
Ashford Pritchard
apritchard2@kpmg.com.au
0411 020 680
