With headcount ballooning, and pay rises ahead of inflation, it’s no wonder the expense ratios of major banks are rising again.
Analysis by KPMG of the results for the four major banks shows that over the past 12 months, total headcount has increased by approximately 3.4% compared with March 2024, and by 1.9% compared with 2H24.
Inflationary pressure has further contributed to the rise in labour costs, increasing by 6.2% compared with 1H24 and by 3.5% compared with 2H24, KPMG said.
Technology expenses have increased by 10.7% compared with 1H24 and by 3.6% compared with 2H24.
While overall investment spend increased significantly by 11.8% compared with 1H24, it decreased by 8.9% compared with 2H24, as a result of seasonality in spending within the year depending on each of the Majors’ respective investment strategies.
The majors’ total operating expenses of $22.7 billion have increased by 6.2% compared with 1H24 and 2.9% compared with 2H24. These costs are primarily comprised of personnel and technology expenses.
“As a result, the average cost to income ratio increased to 49.2%, an increase of 89 basis points from 1H24, although has decreased by 9 basis points compared to 2H24” KPMG said.
Adrian Chevalier, consulting partner at KPMG Australia said: “With technology and digital transformation continuing to attract significant investment across the sector, there is a natural focus emerging on how these efforts contribute to long-term value particularly as institutions navigate rising costs, growing teams, and a competitive revenue environment.”
The majors’ expected credit loss (ECL) provisions increased by 2.8% and 1.3% compared to 1H24 and 2H24 respectively, to $22.0 billion. However, ECL as a percentage of gross loans and advances reduced by 3 and 1 basis points from 1H24 and 2H24 respectively, to an average of 0.65%.
The majors reported a combined profit after tax of $15.5 billion, up 3.5% compared to the first half of 2024, and 4.3% from the second half of FY24.