Banking Matters

Major Banks Analysis May Half Year 2017

Current and future banking trends from Australia and across our global network.


Australia’s major banks had to work hard to return to growth, with a solid outcome in the first half underpinned by trading income, cost control and a reduction in bad debt expenses. Credit growth was primarily driven by home lending, which highlights an increasing dependence on domestic retail operations. This means that the banks are further exposed to the combination of subdued economic conditions and regulatory focus on the Australian mortgage lending market. As a result we expect that the banks will continue to re-think their business and operating priorities for the future as the need to genuinely differentiate escalates.


Key findings: Major Banks Analysis 1H17
  • Cash earnings of $15.7bn returning to growth and up 4.6% from the previous half. One-off items continued to feature. After adjustment for these, cash earnings rose 3.3% on the previous half 
  • Increase in return on equity, up 13.96% in the half and 16 bps on a year ago and settling at a 'new normal' 
  • Net interest margin decreased 3 bps from 2.04% to 2.01% versus the prior half, with loan repricing partially offsetting rising funding costs and treasury impacts
  • Non-interest income increases of $968m on prior half driven in particular by markets and trading income
  • Bad debt expense fell again by 15.5% in the half as prior period increases for specific sectors and regions weren't repeated
  • Cost control was strong and will remain a focus - expense-to-income ratio reduced by 38 bps versus the prior half
  • Combined CET1 capital adequacy ratio increased by 18 bps on the prior half

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Hot topic: Future operating models 

It is evident the banks are taking large steps to respond to the challenges faced by the market, taking advantage of technological opportunities and responding to a faster-moving environment; reshaping their cost bases in the process. We believe this reflects a broader realignment that is taking place around operating models. As the banks truly focus on their points of difference, we expect to see more attention on how their operating models need to change to support these capabilities and maintain performance. Our Hot Topic: Future operating models sets out a series of different approaches that could be taken to help banks ‘win’ in the future.

Read the hot topic



"Our view is that now is the time for a close look at bank operating models, and how to prioritise the differentiating capabilities required to win."

Colin Heath, PwC Banking and Capital Markets Leader


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Contact us

Colin Heath
Leader - Banking and Capital Markets
Tel: +61 3 8603 0137

Julie Coates
Financial Services Industry Leader
Tel: +61 2 8266 2006

Sam Garland
Banking & Capital Markets Partner
Tel: +61 3 8603 0639

Hugh Harley
Financial Services Leader, Asia-Pacific
Tel: +61 2 8266 5746

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