Banking Matters

PwC's Banking Matters provides in-depth analysis of the financial results of the major Australian banks and also explores current and future banking trends from Australia and across our global network.

Current edition

Major Banks Analysis

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From shock absorber to springboard?

Profits hit by pandemic, remediation and restructuring, though banks primed to support customers and catalyse recovery. Can they deliver?

The major Australian bank’s profit fell to $17.4 billion in 2020, and Return on Equity (ROE) to 6.7%, the lowest level since the early 1990s, buffeted by the combined forces of a pandemic-induced recession, longstanding structural challenges on margin, fees and costs, alongside what may be a peak in remediation and restructuring costs associated with the past. 

Looking forward, the outlook presents great uncertainty for Australian banks, with significant variation likely between different sectors, geographies and customer segments, impacted by ongoing evolution of the pandemic, the global economy, monetary system and even geopolitical stability.

The good news is that there are reasons for alert optimism. As severe as the economic crisis has been, the economy has fared better than many expected so far.  Australian banks are as well positioned as they’ve been in a long time, and thanks to the role they have played as ‘shock absorber’ during the pandemic, banks have enjoyed a rehabilitation in reputation that few would have anticipated one year ago. 

This is the time for banks to be banks. Can they deliver? Find out more in our latest major bank analysis.

 

Hot Topic: The rate that stops a nation?

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Preparing for lower or even negative rates in Australia

On Melbourne Cup Day, and again in December, many bankers breathed a sigh of relief when the Reserve Bank of Australia (RBA) announced a pause in the rate cutting which has taken the cash rate to 0.75%, with many expecting it to go lower to 0.25% within the next year.

Although the RBA downplay the possibility, Australians need to confront the very real scenario of interest rates going to zero or below, something that has already occurred overseas.

Australian banks, investors, businesses and other stakeholders now need to understand how negative rates are possible, what they mean for them, and how to prepare for a future economy which will look very different from the one they’ve known for a long time.

In our latest Banking Matters Hot Topic we explore the implications of negative interest rates (NIR) on banks and the Australian economy more broadly, and address four key points around NIR:

  • Capitalism won’t break, and rates can go negative
  • Serious financial challenges from negative interest rates
  • Three kinds of readiness required from banks and other institutions
  • 'No-regrets' actions to take now to ensure preparedness

 

Banking Matters

PwC's Banking Matters series incorporates our regular Major Banks Analysis and industry Hot Topic.

Our Major Banks Analysis provides in-depth analysis and commentary of the financial results of the four major Australian banks, with insights for local and global banking communities.

Our regular Hot Topic explores current and future banking issues and trends, addressing important challenges, opportunities and imperatives facing the banks including risk, regulation, remediation, transformation, workforce, technology, leadership, executive accountability, pricing and cost management.

At the same time, we bring together the right mix of advisers and contributors from inside and outside of PwC demonstrating that important problems are better solved together. PwC is a powerful multiplier of connections and innovation, we bring passionate people together so that insights become impact, opportunities become outcomes and society benefits.

We call this, The Together Effect.
 

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Contact us

Colin Heath

Banking and Capital Markets Leader, PwC Australia

Tel: +61 3 8603 0137

Julie Coates

Financial Services Industry Leader, PwC Australia

Tel: +61 2 8266 2006

Sam Garland

Banking & Capital Markets Partner, PwC Australia

Tel: +61 3 8603 0639

Jim Christodouleas

Banking and Capital Markets Solutions and Capability Leader, PwC Australia

Tel: +61 3 8603 2065

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