Major Banks Analysis: May Half Year 2018
Sizeable restructuring and remediation costs alongside softening credit growth have driven a marginal reduction in cash earnings half on half, signalling turbulence in the trajectory for bank performance over the near term. This took place despite the momentum carried from prior periods, with margins holding up, reasonable control being shown on the underlying cost base and the remarkable continuation of historically-low bad debts.
The outlook for many drivers of returns is challenging, with the possible signs of a long-debated mortgage market reckoning, and the financial consequences of the economic, competitive and conduct challenges we have been monitoring for some time beginning to materialise.
All this is in the context of what we believe may be the Third Wave of Reform of banking in Australia since deregulation. In such an environment, the evolution of margin and cost management will be key.
With Open Banking regulations coming into force in jurisdictions around the world, including last week in Australia, it’s important that Australian bankers understand what it means for them. Is it really going to challenge incumbents the way some say, and make certain business models obsolete? What do people mean when they refer to the 'API economy', PSD2 and GDPR? And what are ‘RESTful APIs’ anyway? Most importantly, why should such things matter for bankers who don’t work in payments or technology and perhaps find the language of Open Banking inaccessible and intimidating?
In our report, we seek to demystify all this and more. Open Banking is more than just a new set of compliance requirements, and it will require much more than just new technology. It will affect almost everyone working in banking today, and every banker has a role to play in its evolution in Australia. Most importantly, while we don’t subscribe to the view that banking will be turned on its head overnight, we believe that it will have profound implications for every part of the industry, and that organisations have a clear task list than can start doing today.
Leader - Banking and Capital Markets, PwC Australia
Tel: +61 3 8603 0137
Banking & Capital Markets Partner, PwC Australia
Tel: +61 3 8603 0639
Banking & Capital Markets Director, PwC Australia
Tel: +61 3 8603 2065
Financial Services Leader, Asia-Pacific, PwC Australia
Tel: +61 2 8266 5746