Australia’s Big Four Have Turned A Corner

Post by Sharat on November 5, 2009 · Under Australian Economy, Business News, banking · Comment 

Global accountancy and consulting firm PricewaterhouseCoopers says it believes that Australia’s Big Four Lenders have finally turned a corner, and will see positive earnings growth growing forward, which will be largely dependent on higher retail deposit funding and wider margins.

Mike Codling of PwC says the performance of the majors during 2009, showed that they managed to weather the financial crisis successfully.

“My sense is that the banks have turned a corner towards positive earnings growth after two years in a row of reduced earnings. In my view, net interest margins will continue to increase and I believe we may have passed the peak in credit losses. If the bad debt expenses return to more normal levels in the future, the banks appear well positioned to improve their earnings.” Mr. Codling said.

The majors posted an aggregate $17 billion or 2.4 per cent decline in underlying cash earnings during 2009, in the wake of a near doubling in credit impairment charges.

Mr. Codling says he believes that the majors are well placed to continue their focus on maintaining higher deposit growth which will support business activity.

Deposit growth and wider interest margins drove profits in fiscal 2009, which offset anaemic growth in total lending, Mr. Codling said. Retail deposits will remain the cornerstone of a stable funding base for the Australian banks, he added.

Since September 2008 deposits have grown 13 per cent while loans grew just 11 per cent.

Domestic household and business deposits gave the big four banks $74.7 billion in incremental funding, but total business lending fell 4.6 per cent during fiscal 2009 PwC said.

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