Banking Agenda - results analysis - Ernst & Young - Australia

“There has been a good performance by the Australian banks. However, with limited potential to significantly grow core revenue in the short-term we expect three key disciplines to drive future growth, cross-sell, cost control and a capital management strategy”.Paul Siviour
Sector Leader
Banking & Capital Markets

The rise of the deposit...

For banks, deposits are clearly the new black. But with this new outfit comes a price and a premium one at that.

Once a cheap, discounted source of funding to the cash rate; deposits are now the battleground for stability and maintaining margin. Complicating this shift in funding mix, the banks are also grappling to explain that ‘large’ and growing profits are not at their customers’ expense, a message which is tough to sell to a disenfranchised, post global financial crisis (‘GFC’) sensitive economy.

In this year’s half year results we have seen a significant shift in consumer and banker psyche, that is, the humble deposit becoming the Holy Grail, in a period of continuing volatility and unpredictability. The question that remains, how long will deposits be pursued at a premium in a highly subdued credit market? At what cost? And will those deposits remain sticky as a source of funding if growth returns? Answers to these questions will have a significant impact on how our institutions will need to operate in future years.

In this edition of Banking Agenda, we reflect on the overall performance of the major banks’ half year results, and further discuss the key challenges over the next period.

Click here to view our report.

Paul Siviour Sector Leader Banking & Capital Markets Phone: +61 2 9248 4188 paul.siviour@au.ey.com

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