KPMG said the profitability of Australia’s major banks declined in the 2024 full year (FY24) as competition squeezed returns.
The professional services firm said its analysis of the four major banks showed they reported a combined profit after tax of $29.9 billion, down 5.7% on FY23.
Return on average equity also fell by 80 basis points to an average of 10.9%, KPMG said in its “Major Australian Banks” report.
KPMG Australia’s Head of Banking & Capital Markets David Heathcote said the results demonstrated resilience despite competition continuing to squeeze margins during a period of sustained ongoing economic uncertainty.
“The Majors continue to grow their asset bases, and credit appetite remains strong despite cost-of-living pressures,” Heathcote said in a media release.
The major banks are Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corporation (ASX: WBC), National Australia Bank (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).
These banks lifted dividends per share by 1.82% in FY24.
They reported growth in total assets of 4.4% with loan portfolios expanding by 5.7%.
KPMG said growth of 5.3% in business lending and 2.1% in consumer lending indicated business and consumer confidence and the increasing likelihood of interest rate cuts.
Operating income was flat at $90 billion but net interest income decreased by 0.5% to $74.4 billion as net interest margins continued to shrink by seven basis points to 180 basis points due to strong competition from competitors, including non-bank lenders.
The average cost to income ratio increased by 336 basis points to 49.2%, in line with the increase in total operating expenses of 5.3% to $44.0 billion, driven by inflation on expenses such as personnel, offset by a decrease in investment spend.
Technology expenses increased by 15.2% to $8.9 billion while overall investment spending eased by 0.7%, reflecting the completion of several large programs.
“The Majors are accelerating digital transformation initiatives in response to customer demand for innovative banking solutions with an increased focus on Generative AI,” KPMG said.