, Australia

Clear skies ahead for Aussie banks as economy improves

Banks can withstand NPL growth due to loan loss reserves.

Australian banks can expect lower asset quality and capital risks as the economy recovers, according to a Moody’s Investors Service report, with their profitability improving as the high loan loss provisions seen in 2020 are unlikely to reoccur.

The country’s economy was able to bounce back come Q3 2020 due to the successful containment of the virus, analysts said. Real GDP growth is projected to hit 3.8% in 2021.

NPL ratios are likely to peak this year, followed by gradual declines as the economy regains strength. Loans subject to repayment moratoriums have dropped to1.4% of total banking system loans as of January 2021.

Banks are well positioned to withstand NPL growth given they have built up significant loan loss reserves in anticipation of a much more severe economic downturn, the report noted.

Low interest rates are still a challenge, but reductions in deposit rates and lower wholesale borrowing costs, will partly offset the impact on profitability. Also, as housing prices rebound, lending growth is likely to pick up from subdued levels.

Profit growth will strengthen banks' organic capital generation, allowing them to maintain high capital ratios. However, capital ratios are unlikely to rise as they are likely to resume dividend payouts at normal levels now that dividend restrictions have been removed.

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Get Asian Banking & Finance in your inbox

VCs flocking to "lucrative" APAC payments segment: report

Global VC deals rose to 620 in Q1 2021.

China injects $15.5b cash into the financial system to maintain liquidity: report

The nation’s top leaders recently described economic recovery as “unbalanced and unstable.”

Chart of the Week: Card payments in China to rebound 21.3% in 2021

Card payments are set to rise as economic activities gathers pace.

Citi APAC adds nearly 650 new wealth professionals in 2021 so far

The group has added over $5b in net new money in Q1 alone.

Goldman Sachs ramps up China ambitions with hiring spree: report

It is planning to add over 400 new people in its headcount in 2021 alone.

Citi appoints new head for private banking arm in South Asia

Lee will have direct responsibility over the private bank arm of Singapore, Malaysia.

Citi APAC rolls out gender diversity program for investment, securities arm

The program’s 50 top candidates will have the chance to be recruited by the bank.

Standard Chartered, EastWest on the blueprint for building the bank of the future

Data is the new oil, says Sarabjit Anand, Standard Chartered’s CIO for Singapore and ASEAN.

Low costs buoys Australian banks’ profits, but pressures to persist

Operating profit is 46% higher than last year, but pre-impairment earnings remain subdued.

HSG shares insights on modelling core banking IT for the digital economy

Sisi Yu gives us a glimpse of how banks can achieve higher performance through improved services.