The efficiency of the banking industry, and the major banks in particular, remains in focus, with elevated personnel expenses.
APRA’s authorised deposit-taking institution performance statistics show the ratio of personnel to operating expenses at major banks reached 58.9 per cent in the December 2021 quarter, the highest in six years.
The cost to income ratio for major banks moderated to 48.4 per cent, but still high.
The aggregate net profit for all banks increased by 18 per cent to A$38.1 billion for the year ended June 2022.
The movement “was largely driven by an increase in other operating income, in particular higher trading income,” APRA said in analysis of the data.
A reduction (down $2.5 billion) in charges for bad or doubtful debts also contributed to ADIs’ increased profit, as provisions raised during the earlier stages of the pandemic continue to be released.
Total assets increased by 4.3 per cent over the June 2022 quarter, and 11.5 per cent over the year, to just over $6.0 trillion.
Deposit liability growth broadly matched asset growth, at 10.7 per cent over the year.
Total capital and common equity tier 1 capital ratios decreased in the June 2022 quarter to 16.9 per cent and 11.4 per cent respectively.
The movement was driven, APRA said, “by a notable increase in market risk-weighted assets, which rose by 18 per cent over the quarter”.
“The increase in market RWA reflected continued market volatility as a result of geopolitical tensions, inflationary pressures and changing market expectations on interest rates over the quarter (which increased ADIs’ need for capital due to interest rate risk in the banking book requirements),” APRA said.
Over the quarter, the non-performing loan ratio improved by 0.1 percentage points to 0.9 per cent as at 30 June 2022. In addition, the provisions to non-performing ratio increased by 1.1 percentage points to 19.4 per cent, largely reflecting a decrease in NPLs over the quarter.
Non-performing commercial property loans as a share of commercial property actual exposures remained steady at 0.5 per cent in the June quarter.