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.
The days of consumer debt helping to power Australia’s economy are numbered. Household balance sheets are stretched to unprecedented levels, so leverage cannot continue growing indefinitely. A return to fundamentals, and the basic purpose of consumer lending in society, is now required.
In this Hot Topic we explore the trends and drivers that are shaping the Australian housing and non-housing credit market. In the housing credit market, lenders need to move away from the sales-focused paradigm of market share and growth. Home lending requires improved risk selection, streamlining and efficiency. For non-housing credit, a different proposition and economic model can undo adverse selection and bring low-risk customers back into the market.
This will require business models, product offerings and the customer experience to become simpler, smaller and more deeply connected with customers. Putting this together, we can have a better relationship with consumer credit in Australia. This publication explains how this can be achieved.
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.
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