The Australian major banks (the 'Majors') performance has recovered from last year, on the back of a strong public health response to COVID-19, as well as assertive Government fiscal and policy interventions to support jobs and the economy.
In turn, the Australian banking sector has benefited from an economic performance that has been better than anticipated with household finances in a strong position. As a result, cash profit after tax from continuing operations has increased by 62.3 percent from the previous corresponding period to $13.8 billion.
In this constrained environment where profitability has started to rebound, the challenge will be to balance investors’ ROE and dividend payout expectations, the necessary growth, transformation efforts, and community and customer expectations. Whilst prior period ROE concerns may be partially alleviated with a return towards double-digit ROE in 1H21 and higher payout ratios, sustainability is now a key question of shareholders.
Looking ahead, the earnings pressures facing the Majors will not change over the next reporting cycle as cheap funding facilitated by the Term Funding Facility (TFF) closes on 25 June 2021, putting pressure on net interest margins.
An infographic snapshot of the major Australian bank's full year financial results.