banks’ full year
Solid performance but who will
win the execution race?
Figures throughout this report are calculated on the prior corresponding period unless otherwise stated.
ANZ, NAB and Westpac’s full year reporting periods ended on 30 September 2017. CBA’s full year reporting period ended on 30 June 2017.
Unless otherwise specified, references to the banks in this publication refer to the ‘big four’ Australian banks: ANZ, CBA, NAB and Westpac.
Australia’s major banks have delivered another solid financial performance for the 2017 full year. Results were shaped by:
- Sustained earnings momentum – from housing lending growth, low credit losses and cost management measures
- Profitability pressures – with net interest margin declining across the banks
- Strong capital and asset quality – with most banks adding to their capital ratios and improvement in asset quality
- Digital innovation – with new technologies enabling banks to drive new efficiencies and customer experience
The banks have demonstrated they can maintain profits against a challenging backdrop. However, they must now show they can successfully execute on the digital, customer and regulatory compliance agenda for long-term sustainable performance. As the banks continue to reshape their businesses for future performance, four priorities will be critical:
- Implementing strategies for sustainable and profitable growth, with a focus on embedding the right customer experience fundamentals
- Optimising the balance sheet and using technology to improve service and reduce cost
- Managing risk and regulatory compliance
- Rebuilding trust
Executing well in each of these areas will require the banks to manage the tension between the competing demands of growing the business and keeping the bank, and customers, safe. Advanced technology will be a key enabler, allowing the banks to continuously evolve in response to a rapidly changing and digitising world. Building an ecosystem that enables engagement with digital partners to accelerate innovation will also support successful execution.
Trust: can it be restored?
EY research 1 indicates that consumers have diminished trust in banking relationships. Following a string of conduct-related issues, the Government, regulators and the banks are all stepping up efforts to enhance accountability and improve risk cultures.
The spotlight on trust keeps getting bigger. It includes: the Banking Executive Accountability Regime to improve bank culture and governance, the House of Representatives Standing Committee on Economics’ review of the major banks, ongoing calls for a Royal Commission, and ongoing regulatory audits and inspections by regulators. As a priority, the banks need to focus on developing a customer-centric culture that promotes transparency. At the same time, further investment is required to meet the competing demands of all stakeholders equally - customers, shareholders, regulators and government.