Profits across the banking sector fell sharply in 2020, the Australian Prudential Regulation Authority (APRA) has announced. The news comes despite the ongoing boom in housing and property, which has lead to record growth in home loan, house prices and at home auctions.
APRA produces two statistical documents, the Quarterly Authorised Deposit-taking Institution (ADI) Performance and the Quarterly Authorised Deposit-taking Institution Property Exposures, which aggregate performances across the banking sector.
The most recent editions were released this week and show a significant drop in profits for the quarter, and year, ending December 2020. The NPAT came to $21.9 billion, over a third lower than the same period in 2019.
Obviously, those numbers are highly affected by the COVID-19 pandemic, which kicked in at the beginning of 2020 and sparked an economic downturn globally. That first period of the year saw just $1.5bn in profits reported, more than $5bn down on the year before.
These numbers began to trend back in the right direction as the worst of the pandemic eased and the property market began to pick back up. For Q2, running until June 2020, $7bn in profits was reported, though this fell back to $3.6bn for Q3.
Q4 was the strongest part of the year, as is usually the case, and December 2020 ended with nearly $10bn in profits across Australian banks.
APRA put the fall in profits down to a drop in total income caused by the pandemic, without a concurrent drop in operating expenditure.
“The ADI industry was resilient in the December quarter, with high capital ratios and strong liquidity and funding positions,” they said in a statement. “Industry profitability improved over the quarter due to reduced charges for bad or doubtful debts. Overall, growth in loans and advances was slow, although housing lending grew moderately, supported by lending to owner-occupiers.”
“Despite moderately increased new lending at higher loan-to-valuation ratios and debt-to-income ratios, available indicators do not suggest any material relaxation in housing lending standards, with these metrics remaining broadly in line with historical averages.”
“Key measures of asset quality were stable thanks to a range of measures providing support to borrowers, but the outlook is uncertain as support measures change over coming quarters.”
