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.
Our latest Major Banks Analysis for the full year reveals the stark reality of the sustained challenges facing the banking industry, with the major banks delivering a set of financial results almost uniformly down across the board. Full-year cash earnings from continuing operations for 2019 fell to their lowest level since 2012, and return on equity (ROE) to its lowest level since the 1990s.
This reality has been well flagged and touches almost every part of the business. The largest and most immediate challenges were remediation and business reshaping, which served to reduce after-tax earnings by more than $4b. However, beyond this, the core of the business showed signs of strain that bankers have been feeling for some time: net interest margins, balance sheet growth, market share, other operating income and credit costs were worse than last year; and despite efforts on the cost base, expenses were only flat.
However, this new era is not without opportunity. The strategic foundations underlying major-bank franchises remain strong and are what we see the banks leaning upon to navigate through this period. The emphasis on transformation and, most critically, execution is critical - building platforms for the era to come.
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:
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.
Leader - Banking and Capital Markets, PwC Australia
Tel: +61 3 8603 0137
Managing Partner, Clients & Markets and Financial Services Industry Leader, PwC Australia
Tel: +61 2 8266 2006
Banking & Capital Markets Partner, PwC Australia
Tel: +61 3 8603 0639
Banking & Capital Markets Director, PwC Australia
Tel: +61 3 8603 2065