Roland Houghton – Investment Analyst – November 12, 2019

Some of the most widely anticipated company reports occurred over the past week, with three of the “Big Four” Australian banks reporting their full year results. ANZ, National Australia Bank and Westpac reported results that were soft across most key metrics with cash earnings declining by 2% on average.

This  is not surprising given the multiple headwinds the sector has faced over the past 18 months, such as:

1. Weaker lending growth due to a historically soft Australian housing market,
2. The Royal Commission into banking misconduct with the subsequent fallout resulting in billions of dollars of remediation to customers coupled increased compliance costs,
3. Falling net interest margins (the gap between what the earn on their lending and what they pay to depositors) as a result of the Reserve Bank of Australia cutting the official cash rate 3 times in 5 months,
4. Intense competition from smaller new entrants into the Australian housing market

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