KPMG Major Australian Banks Half Year Analysis 2020. KPMG analysis finds that the Australian major banks (‘the Majors’) have reported a decline in aggregate cash profits for the first half of 2020.
KPMG’s Major Australian Banks Half Year Analysis Report 2020 finds that the Majors reported a combined cash profit after tax from continuing operations of $8.3 billion, down 42.6 percent on the same period in FY2019.
The Australian economy faces an unprecedented level of uncertainty surrounding the size and duration of the financial downturn resulting from the COVID-19 pandemic.
FY2020 will be a year where the Majors will play a critical role supporting the economy to withstand the impact of the crisis and to help in its recovery. Furthermore, it is an important opportunity for the industry to rebuild community trust and purpose, much of which was lost during the Royal Commission.
Against this backdrop, the Majors have recorded a fall in profitability, as revenue and margin pressures continue, with elevated cost bases and deteriorating asset quality impacting negatively on industry returns.
Ian Pollari, KPMG Australia’s Head of Banking commented: “The biggest challenge for the Majors will be balancing the necessary support for the recovery effort and in doing so, restoring their reputations, whilst at the same time navigating a number of structural headwinds.”
While the Majors face these exceptional circumstances in a relatively strong position – from a liquidity, funding and capital perspective compared to the Global Financial Crisis – it is clear that the effects of this crisis will be long-term and profound in terms of impact.
“The Majors have the opportunity to use COVID-19 as a catalyst to accelerate their digital transformation, simplification and operational resilience efforts”, added Mr Pollari.
Hessel Verbeek, KPMG Strategy Partner, Banking, said: “While the Majors have proven resilient so far, it is too early to estimate the full impact of the COVID-19 crisis on their 2020 performance.”
“The Majors will have to contend with the demands of customers who want relief from loan repayments, a government which wants credit made available, a regulator which wants unquestionably strong balance sheets and shareholders who want strong profits and dividend payouts”, Mr Verbeek added.
Looking forward, COVID-19 will undoubtedly have an adverse impact on revenue performance (fee waivers), loan growth (soft underlying growth partially offset by drawdowns by corporates) and asset quality in FY2020 and beyond. However, the banks that recognise the new reality and take bold, proactive measures to preserve positive changes made during the crisis and that use it to re-set their operating models and ways of working, will come out of it more quickly and be in a stronger position to capitalise on future opportunities.
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