While the COVID-19 pandemic has undoubtedly delivered both short and long-term change to the Australian banking landscape, the domestic market is expected to fare better than many others around the world, according to data and analytics company GlobalData.
As the response to the virus gained momentum on a global scale, GlobalData initially predicted that not only would the profits of Australian banks be significantly down over the quarter, but the squeeze on smaller lenders could result in significant consolidation of the market.
“Government support – particularly the cheap funding – will help, but it can only mitigate the impact,” said Resham Karira, retail banking analyst at GlobalData.
“The recent upswing in ADIs driven by the launch of neobanks, appears set to reverse. The exit five years could see up to a quarter of ADIs exit the market via sales or mergers.”
While there are no doubts it will take some time for business as ususal to recommence, GlobalData has revised its initial predictions down to a "very slight decline" to total consumer loans.
“Spending will decline and businesses will be hesitant to take on even attractive loans when they have no income. Retail customers and small businesses are more vulnerable," explained Karira.
“Banks could see a rise in the delinquency rate, resulting in higher non-performing assets.”
However, GlobalData’s updated post-COVID-19 forecasts for the domestic market are “not as bleak in Australia as in other countries”.
Mortgage balances are still expected to post growth in 2020, even with expectations having been revised down across lending and mortgage categories.
Consumer loans are only predicted to decline by 0.2%, with credit card balances expected to drop by 5.5% over the year – the same figure provided in pre-COVID-19 forecasts.
