Supporting growth through uncertainty

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Supporting growth through uncertainty

Australian major banks half year results 1H22

Australia’s economy confirmed its resilience and GDP is now well above pre-COVID levels. In parallel, the major banks have lifted their half year cash profits by 5.1% to $14.4 billion vs 1H21.

The Australian banking sector has emerged from the pandemic largely unscathed, without requiring the emergency capital and loan loss provisions that were accumulated during the recent economic downturn. However, there are several uncertainties that have recently presented the sector, in particular rising inflation and interest rates.

While expected further interest rate rises should provide a tailwind for the sector and ease some of the pressure on their net interest margins (NIM), the extra competition may limit the benefits from these higher interest rates and could lead to an increase in defaults and higher credit losses.

Read our analysis of the 1H22 results of the four major banks to compare key performance indicators – we also include commentary on the second-tier banks and how they compare.

Australian major banks half year results 1H22

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Growth

Income growth continues to be a challenge; total income increased by 0.8% to $39.9 billion.

Efficiency

The major banks’ total operating expenses decreased to $19.7 billion, representing a 1.0% decrease from 1H21.

Quality & Risk

Rising inflation and interest rates, supply chain disruptions and geopolitical headwinds have driven banks to take a slightly more conservative macroeconomic outlook. This has resulted in lower impairment benefits and some banks recognising impairment charges in 1H22.

Capital & Funding

Capital and liquidity positions remain strong, largely due to divestments – all banks declared higher dividends.

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