The FY18 cash profits of the four major Australian banks declined by $2 billion (6.5%) to $29.5 billion with strong credit conditions offset by rising regulatory related costs.

With lower revenue growth expected, all four banks are simplifying their business models. Three of the major banks have already divested, or are in the process of divesting one of more of their life insurance, funds management, wealth management, or elements of their offshore operations.

The banks have focused on driving cost efficiencies at the same time as they invest in technology to improve customer experience, and also reduce risk and complexity. FY18’s results also reflected increased costs incurred by the banks for customer remediation and other regulatory related matters.

High credit quality and low credit losses were positives as was the capital strength of the major banks. All four of the banks are reallocating capital internally to owner-occupied home lending and business banking.

Further reading

• Deloitte Trust Index – Banking 2018
• Banking Industry Outlook 2018
• Deloitte Australian Mortgage Report 2018
  

Published: November 2018