Australian banks shrug off damaging probe as earnings rise in 1H2018

Latest financial results show improving asset quality despite an ongoing inquiry into banking malpractice.

Despite an ongoing probe bringing to light industry-wide malpractice at the country’s financial system, Australian banks registered stable financial performances including improved asset quality and profitability, according to Moody’s Investors Service.

The non-performing loan ratios of Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac averaged a low 0.78% in the period 1H2018 although CBA’s results were for the six months ending December 2017.

“Bank profit also remained supported by low impairment charges and ongoing benefits from earlier re-pricing of some mortgage products,” the credit rating agency noted.

Even as the threat of slower credit growth looms which could pressure net interest margins in the near term, banks remain well-capitalised to withstand shocks brought about by economic or housing market shocks in light of banks’ large exposure to mortgages.

“The banks' robust capitalisation provides a strong buffer to these rising risks. The four banks' capitalisation remain well positioned to meet the Australia Prudential Regulation Authority's (APRA) 'unquestionably strong' benchmark, which will take effect 1 January 2020,” Moody’s added.

The steady profitability comes even as a probe by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has brought to light decade-long unethical practices by the country's largest lenders which ranges from lying to regulators, falsification of documents, taking bribes and extracting fees from dead customers.

Also read: Australian bank inquiry could cut 8% of country’s finance jobs

ANZ earlier scrapped bonuses for its financial planners whilst CBA’s financial boss Rob Jesudason was the fifth executive to pull out from the embattled bank amidst the ongoing inquiry.