Royal commission bites deep into banks

Banking Day staff Financial institutions / Big five & fintech

The combined market share of residential mortgages of the four big banks contracted by 92 basis points to 81.2 per cent over the year to September 2019  - and thanks to KPMG for putting that in the top line of their infographic.

  • Operating income across the sector decreased 4 per cent to A$81.3 billion. Think about that, plus all that net interest income – the costs of running basic banking services in Australia are obscene.

  • Customer remediation costs soared 268 per cent to $4.5 billion and may fly over $10 billion in a single year soon before all is costed and settled.

  • The average cost to income ratio increased by 313 bps to 49.7 per cent and it’s well over 54.8 per cent at NAB. Commonwealth Bank have the advantage with a cost ratio of 46.7 per cent. (This draws on EY analysis and using statutory not cash profit).

  • Managing margins is a delicate, the big bank average down eight bps to 1.94 per cent. On NIM, Westpac and Commonwealth Bank share the advantage with NIMs of 2.12 per cent and 2.10 per cent respectively.

The average return on equity decreased by 131 bps to 11.0 per cent and (they just don’t get it) the average dividend payout ratio increased by 161 bps to 85.1 per cent.

The NAB and Westpac dividend cuts are only the beginning.

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