Major Australian Banks: Full Year 2015 Results Analysis | KPMG | AU
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Major Australian Banks: Full Year 2015 Results Analysis

Major Australian Banks: Full Year 2015 Results Analysis

The Australian major banks reported combined cash earnings of $30.0 billion, an increase of 5.4 percent from last year, but return to shareholders is down as the banks face an accelerating pace of change and compounding challenges.


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Major Australian Banks: Full Year 2015 Results Summary

Revenue and margin headwinds, rising costs and capital levels, and a deteriorating credit quality outlook all mean the majors will face significant challenges in the year ahead.

Key components of the results

  • Return on Equity is down from 15.5% to 15.0%, with this downward trend likely to continue as banks continue to increase their capital levels over the years ahead. 
  • Capital raising initiatives to comply with APRA’s revised guidelines have seen the Common Equity Tier 1 (CET1) average capital ratio increase to 9.6%, up 68 basis points. 
  • Net interest margins are continuing to contract to a record low 2.02%, down 5 basis points from last year, reflecting strong competition for new lending. 
  • The average cost to income ratio decreased to 45.3% from 45.6% in 2014, but banks will need to fundamentally change their operating models to enhance the customer experience, while at the same time, significantly reducing their cost base going forward. 
  • The major banks’ aggregate charges for bad and doubtful debts increased by $363m to $3,764m this year. It is likely we have now seen the bottoming of the credit loss cycle, and the trend in lending losses is now on an upward trajectory.

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