Major Banks Analysis: December Quarter Snapshot
For the quarter ending December 2017, cash earnings were down (to the extent reported) due to slowing top line growth, a significant $575 million provision for legal and compliance obligations, and the rising costs of organisational change. Despite the general tone of caution on the earnings outlook, the banking fundamentals (volume, margins, asset quality) remain healthy in absolute terms.
The provisions taken is a stark example, if one were needed, of the strategic and execution challenges facing the industry in a radically changing social and political landscape. In this context, we may well see the shaping of a congruent and holistic response to genuine concerns covering conduct, trust and accountability as a competitive advantage for any bank over the medium term.
The industry’s journey is just at the beginning, and at this stage it is impossible to say precisely where it will lead. But we do envisage that over the next two years there will be a number of important ‘moments of truth’ (see below) which will give bankers and customers an opportunity to take stock.
While the journey ahead does present a number of formidable challenges, there is also the opportunity to re-engage with customers and the community as a whole, with a view to providing a more transparent, open and fair ‘deal’ to rebuild the trust that has been lost. What’s more, there are useful examples from around the world of institutions and even entire industries grappling with the same issues of trust, accountability, risk and control facing Australia’s banks. In addition to our snapshot of the December quarter results, we’ve summarised how one such location, the City of London, is going about this and hypothesise lessons for Australia.
Leader - Banking and Capital Markets, PwC Australia
Tel: +61 3 8603 0137
Banking & Capital Markets Partner, PwC Australia
Tel: +61 3 8603 0639
Financial Services Leader, Asia-Pacific, PwC Australia
Tel: +61 2 8266 5746
Banking & Capital Markets Director, PwC Australia
Tel: +61 3 8603 2065