Challenging economic and regulatory conditions have taken their toll on the country’s leading banks.
A report from KPMG revealed the majors posted a combined cash profit after tax of $26.9m in the 2019 financial year – down 7.8% from 2018.
According to the report, fallout from the royal commission and the high volume of ongoing prudential, regulatory, and parliamentary inquiries, together with litigation proceedings, have impacted the majors’ operating costs.
“A turning point for the majors was the overall decrease in total operating income, drive by strong competition, particularly in mortgages, as well as a rebasing of fees following the royal commission,” said Ian Pollaro, head of banking at KPMG Australia.
“Management will face into the careful balancing act of fixing problems and re-building trust with customers, at the same time as creating capacity to invest digital and technology capabilities in a lower growth cycle.”
The ongoing effects of the majors’ customer remediation programs also continue to negatively impact financial results, with are routinely called out as “notable items” within their cash profits.
“The majors’ profits are down significantly as a result of shrinking margins in a low-interest rate environment and higher costs, including refunds to customers, in the aftermath of the Royal Commission,” said Hessel Verbeek, strategy partner – banking at KPMG.
