The issue that came up more than any other during the big banks’ investor briefings over the past two weeks was costs. Analysts were keen to know what the banks planned to do to address a situation where revenue is down, and expected to stay down for some time, and costs keep going up.

In 2019/20 financial reports released by ANZ, NAB and Westpac all reported lower revenue and higher expenses over the 12 months to September.

ANZ’s operating income of A$17.6 billion was down 6 per cent compared with the previous year, while operating expenses rose 3 per cent year-on-year to $9.4 billion. The ratio of operating expenses to operating income rose from 50.2 per cent in 2018/19 to 54.5 per cent. The bank preferred to focus on expenses from continuing operations and excluding notable items, which rose from $8.5 billion to $8.6 billion.

ANZ’s net interest margin fell 12 bps from an average of 1.75 per cent in 2018/19 to 1.63 per cent in the year to September. NIM fell further in the second half – down to 1.57 per cent.

NAB’s net operating income fell 1.4 per cent to $17.2 billion, while operating expenses, excluding large notable items, rose 2 per cent year-on-year to $7.7 billion. The cost-to-income ratio rose from 42.8 per cent to 44.3 per cent.

NAB’s net interest margin fell one basis point to 1.77 per cent

Westpac’s net operating income fell 2 per cent to $20.2 billion, while operating expenses rose 26 per cent to $12.7 billion. The cost-to-income ratio rose from 48.9 per cent in 2018/19 to 63.1 per cent in the year to September.

Westpac’s net interest margin averaged 2.03 per cent over the course of the year – down 9 basis points from the previous year. It averaged 1.8 per cent in the September half.

Commonwealth Bank was the only one of big four to report growth in revenue: total banking income of $23.4 billion was up 1 per cent compared with the previous year, while operating expenses rose 1 per cent to $10.9 billion. The ratio of operating expenses to total operating income remained unchanged at 45.9 per cent.

CBA’s net interest margin fell 2 basis points to 2.07 per cent.

Analysts kept coming back to the issue of cost control in investor briefings, especially ANZ’s. Chief executive Shayne Elliott had given a commitment that the bank could hold its expenses at $8 billion and analysts were keen to know when it would hit that target.

Elliott said there were opportunities to cuts costs in the distribution side of the business by restructuring the branch network and introducing more process automation and digital services.

“We are still heavily manual,” Elliott said.

He said he was not concerned if expenses went over the $8 billion target over the next few years if there were investment opportunities that would produce long-term benefits.

“Customers are changing from cash to card and from branch to online,” he said.

He promised greater clarity on the bank’s “cost pathway” when the bank delivers its March half results next May. “We