Australian major banks half year results FY21

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Return to growth

Australian major banks half year results FY21

Given the stronger than expected economic recovery, it is not surprising that the aggregate 1H21 cash profits of the major banks increased by $5.3 billion to $13.8 billion (62.3% up vs 1H20).

The loan loss provisions made a year ago reflected the economic uncertainty at the time. With Australia rebounding faster than originally expected, the sector is now optimistic about what lies ahead.

While cash profits have improved, due to the write-back of COVID provisions, banks still face future growth challenges, in part from the continued pressure on margins due to low interest rates.

Read our analysis of the FY21 half year results of the four major banks to compare key performance indicators – we also include commentary on the second-tier banks and how they compare.

Major banks results 1H21

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Growth

Net interest income growth remains a challenge in the short to medium-term as greater pressure is placed on NIM.

Efficiency

Collectively, the major banks’ total operating expenses decreased to $19.9 billion, representing a 4% decrease over the last year mainly due to a reduction in large notable items. Continued focus on simplification, digitisation and automation of processes helped the majors to deliver significant productivity savings.

Quality & Risk

Australia’s better than expected economic recovery from the pandemic continues to improve the asset quality of the major banks.

Capital & Funding

Major banks continue to improve their CET1 ratios while committing to higher dividends. The RBA’s term funding facility (TFF) played a key part in the banks’ funding sources, as have significant increases in deposit funding.

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